Job market shows signs of slowing

Private employers added fewer jobs in May, data from the ADP Research Institute in collaboration with the Stanford Digital Economy Lab, a slower pace of hiring compared to the prior month in what economists say could be a sign of a slowdown in the labor market.

Companies hired 152,000 people last month, 40,000 less than in April. The biggest gains came from the service sectors, particularly in the trade, transport, utilities and financial services segments of the labor market. Meanwhile, medium-level companies with employees of between 50 to 499 workers added 79,000 jobs. Large businesses with at least 500 employees hired 98,000 people. Smaller-sized entities with 20 to 49 workers lost 36,000 jobs.

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Manufacturing saw the largest losses in the month as it saw a decline of 20,000 jobs. The information sector lost 7,000 jobs while the professional and business services industry shed 6,000 roles. Meanwhile, the western part of the country was the only region that reported job losses of 10,000 with those declines coming particularly from the Pacific areas.

“Job gains and pay growth are slowing going into the second half of the year,” Nela Richardson, chief economist at ADP, said in a statement. “The labor market is solid, but we’re monitoring notable pockets of weakness tied to both producers and consumers.”

As job gains slowed, earnings also came in at a lower level last month than in April. Pay for employees who changed jobs was up 7.8 percent in May, less than the 9.3 percent increase reported in the prior month. Workers who stayed at their current jobs had pay stay at 5 percent with median annual earnings at about $58,000.

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Economists point out that the labor market is still hiring but there are signs of slowness and workers are seemingly less willing to quit their jobs right now even as hiring continues and job openings are available for prospective workers. On Tuesday, government data showed that available jobs in the market dropped to a three-year low.

“The ADP employment report is another sign the economy is moving in low gear in the second quarter, with more moderate wage growth than in 2022 or 2023 and employment declines in cyclical industries,” Bill Adams, the chief economist at Dallas-based Comerica Bank, said in a note shared with Newsweek. “The economy is still growing…But businesses are hiring less than a year or two ago.”

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The unemployment rate is still low historically and has been under 4 percent for more than two years. Experts say after the convulsions of the pandemic and post-COVID years, the jobs market may be stabilizing to a dynamic where companies can find workers and employees can find jobs, though it may take a little longer than over the last couple of years.

Physically demanding sectors, like construction, are still looking for workers, while the leisure and hospitality, education and health services were still recruiting, ADP data showed.

“But other industries have seen demand soften and are either hiring more slowly or trimming back on headcount,” Adams said.

On Friday, the Bureau of Labor Statistics will reveal jobs numbers for May. Michael Pearce, Oxford Economics’ deputy chief U.S. economist, told Newsweek that a net job gain of 205,000 is anticipated.

There has been evidence of layoffs from the weekly unemployment initial claims report, but these could be seasonal, according to Pearce.

“May is typically when layoffs in state and local government education begin as the school year ends. We anticipate a little more than normal layoffs,” he told Newsweek.

The Friday data is likely to show unemployment rate stay at 3.9 percent, he added.

“Employment growth will slow gradually over 2024, but layoffs remain low. The labor market is strong, with conditions gradually cooling as demand for workers eases and labor supply rises, which is necessary to bring wage growth back down to rates consistent with the Fed’s inflation target,” Pearce said, referring to the central bank mission to bring inflation down to 2 percent.

Update 06/05/24, 12:40 p.m. ET: This article has been updated with comments from Bill Adams and Michael Pearce.