Private-sector firms created just 37,000 jobs in May, the weakest number in more than two years. This sharp drop comes after a surprisingly strong April, when 60,000 jobs were added. For economists, the number was alarming, as employment gains have decelerated for a second consecutive month. They were looking for a gain of 130,000 jobs for May.
The new employment estimates released by ADP on Wednesday are a stark reminder of just how quickly both the labor market and economy in general have deteriorated. According to Nela Richardson, the chief economist at ADP, “It’s like driving through fog for some of our firms here.” The uncertainty surrounding President Donald Trump’s policies has left many businesses cautious about input costs, leading to a hesitancy in hiring.
The goods sector saw the largest loss of 2,000 jobs. Workers who continued to work with the same employer had a 4.5% increase in wages. The latter group saw an even bigger jump of 7%. A cooling in the labor market. These figures could suggest that although job creation has slowed, there is still a relatively competitive labor market for talent.
That’s why some economists raised an alarm about what these employment numbers might signal. Once this data was released, U.S. stock futures fell, signaling investor nervousness over the economy’s impending slowdown. This Friday’s official monthly jobs report from the Department of Labor will almost certainly show a slowdown in job creation. Experts are looking for the NFP number to drop from 177,000 in April to about 130,000 come May.
Richardson commented on the current state of the labor market, stating, “The weak numbers we’re seeing now do not point to a labor market that’s collapsing, but there is hiring hesitancy.” This hesitancy among firms could add more uncertainty to the ongoing economic recovery as all eyes watch the situation closely.
Central bankers, including Federal Reserve Chair Jerome Powell, have adopted a cautious approach to monetary policy amid these uncertain conditions. The cumulative effect of slower job growth and upcoming rate changes is still central to economic debates these days.