Hiring Cools to Slowest Pace in Two Years, ADP Data Shows
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Hiring decelerated to the slowest pace in two years as sectors including business services, education and health shed jobs, pointing to a weakened demand for workers.
Private-sector payrolls increased by 37,000 in May, according to ADP Research, lower than all estimates in a Bloomberg survey of economists. That marked the second month in a row when the figures were well below expectations.
“After a strong start to the year, hiring is losing momentum,” Nela Richardson, chief economist at ADP, said June 4 in a statement.
The figures suggest the past two months of high anxiety around President Donald Trump’s ever-changing economic policies weighed on business staffing decisions. Hiring has slowed and it is taking longer for people who are out of work to find a new job. Economists anticipate the labor market will show more signs of cooling in the coming months.
Trade, transportation and manufacturing also lost jobs in May, the data shows, while leisure and hospitality, as well financial activities, increased hiring. The Northeast shed the most jobs, and, by business size, small and large companies cut payrolls.
On social media, Trump reiterated that Federal Reserve Chair Jerome Powell should lower interest rates, following the ADP report. Last week, the president had called Powell to the White House and pressed him to cut rates.
The economy has held up this year and inflation remains above Fed officials’ 2% goal — reasons policymakers cite for leaving rates unchanged while they wait for more clarity on how Trump’s tariffs will affect the economy. By contrast, the European Central Bank has lowered rates seven times since June 2024 — and is expected to cut again this week — as U.S. tariffs have weighed on growth across the bloc and inflation in the eurozone has ebbed.
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ADP offers a supplementary view of labor market conditions ahead of the government’s monthly employment figures — it’s not designed to help predict them. Economists expect the jobs report due June 6 will show that growth in nonfarm payrolls slowed last month from a solid April hiring pace and the U.S. unemployment rate remained steady.
“As usual, we suggest ignoring the message from the ADP employment report, mostly because it has had a very poor track record in recent years,” Oliver Allen, senior U.S. Economist at Pantheon Macroeconomics, wrote in a note. “Payrolls always have scope to surprise,” but Pantheon is sticking to its forecast that private payrolls rose by 110,000 in the May employment report, which would represent a more gradual softening from the average growth of the past six years.
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In her statement, Richardson noted that while hiring slowed, pay gains remained robust. Workers who changed jobs saw a 7% increase in pay, while those who stayed put saw a 4.5% gain. The ADP report, published in collaboration with the Stanford Digital Economy Lab, bases its findings on payrolls covering more than 25 million U.S. private sector employees.
A majority of consumers in a University of Michigan survey continue to anticipate that business conditions will worsen over the next year and unemployment will rise.
