On Wednesday, the country’s largest payroll processor, ADP, announced that private-sector employers hired 27,000 people in May. This number was a dramatic reversal from their report on April hiring, which said employers added a remarkable 271,000 people. Many economists and market analysts expressed shock at the surprisingly low number.
See more on ADP’s May hiring numbers…
Every month, ADP produces what is known as the ADP National Employment Report, based in part on the data generated from their vast payroll processing business (they issue payroll to 24 million Americans). This is viewed as a leading indicator to the more official government’s Labor Department jobs report which is due out tomorrow.
Although the two reports can vary from each other, over time they tend to track the other pretty closely – even though they are compiled through completely different methods on different data.
The Smallest Increase in Jobs Since March 2010
This 27,000 gain in May jobs is the smallest increase in jobs since March 2010, when the country was coming out of the last recession. Economists were caught totally off-guard by this reading – a survey of economists had forecast a jobs gain in May of 175,000 (Econoday). This low reading now adds a tremendous amount of drama (and nervousness) in advance of the government’s official employment report hitting Friday.
Who Got Hit the Hardest? Small Employers
One thing that is easy to see from the report however, is that the sector hit hardest in jobs was small businesses – those companies with less than 50 employees. According to the ADP data:
- Large companies with 500 or more employees – saw 68,000 jobs added
- Midsized companies with 50-499 employees – saw 11,000 jobs added
- Small companies with 1-49 employees – saw 52,000 jobs cut in May
“Job growth is moderating. Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting.”Mark Zandi, chief economist at Moody’s Analytics
Drama Builds for Gov’t Data Being Released Tomorrow
So all eyes turn to the impending government report on employment to be released on Friday. Historically, there have been variances between ADP’s results and the government results. However, over time their trends tend to come together pretty closely, as you can see in the chart below.
Last month, for example, ADP reported initially that employment had grown by 275,000 jobs in April. The Labor Department reported a 263,000 increase in employment. ADP ultimately revised their report down to 271,000 jobs for an even narrower gap. That’s a difference of only about 3% between the two reports.