The high-flying job market may have drifted back to Earth last month.
The government’s closely watched employment report, due Friday, could show a marked slowdown in job growth after a private survey on business hiring fell short of estimates.
Businesses added 179,000 jobs in May, payroll processor ADP said Wednesday, well below the median forecast of 210,000 in an Action Economics survey
The ADP report is tracked as a possible harbinger of the Labor Department’s employment survey, which compiles both private- and public-sector hiring totals. Both reports have shown average job gains topping 200,000 from February through March.
ECONOMY: Service firms grow at fastest pace since August
WORKFORCE: Productivity fell sharply in first quarter
TRADE: April trade deficit widens to $47.2 billion
In April, Labor said job gains totaled 288,000, the most in more than two years, as the economy and job market emerged from a brutal winter.
While both the ADP and Labor Department surveys reflect similar broad trends, ADP has differed from Labor’s tally of private-sector additions by an average 36,000 in the past year, according to High Frequency Economics (HFE).
This time, however, several economists said ADP may accurately reflect a natural tempering of after April’s outsize gains, and not a fundamental slowing. “This would not be a disaster,” Paul Dales of Capital Economics said in a research note. “The labor market remains strong, and the economy is still recovering” from the weather-tainted first quarter.
Several economists said they’re sticking to their bullish forecasts for Friday’s reports. Median projections call for about 220,000 job gains in May. UBS notes that a measure of service-sector employment out Wednesday showed a pickup in activity last month. Also, first-time jobless claims, a gauge of layoffs, have continued to fall to pre-recession levels.
In May, small businesses added 82,000 jobs; midsize ones, 61,000, and large companies, 37,000. Job gains slowed particularly among midsize companies with 50 to 999 employees, says Mark Zandi, chief economist of Moody’s Analytics, which helps ADP compile the report.
Professional and business services led job gains, with 46,000. Trade, transportation and utilities added 35,000, and construction firms, 14,000.
“Job growth moderated in May,” Zandi said. “The job market has yet to break out from the pace of growth that has prevailed over the last three years.”
The government said last week that the economy shrank in the first quarter for the first time in three years, as adverse weather, among other temporary factors, crimped activity. But measures of manufacturing output and business investment have rebounded in the second quarter.
In other economic news:
• Service firms grew at a healthy pace in May as the Institute for Supply Management says its service-sector index rose to 56.3 in May from 55.2 in April. Any reading above 50 indicates expansion.
• Productivity fell more sharply than previously estimated as the government said it dropped 3.2% in the first quarter.
• The U.S. trade deficit widened to its highest in almost two years in April as goods imports set a record.
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