Employment growth at US companies last month exceeded all projections, highlighting a durable labor market that continues to buttress the economy.
Private payrolls increased 278,000 following a revised 291,000 gain in April, according to figures published Thursday by the ADP Research Institute in collaboration with Stanford Digital Economy Lab. The median estimate in a Bloomberg survey of economists called for an increase of 170,000.
The increase in May hiring was led by leisure and hospitality, while mining, construction and trade and transportation also added to headcount. The gains were concentrated in companies with fewer than 500 employees. The South was the only region shedding jobs.
Wage growth, however, decelerated, according to ADP’s data, which analyzes payrolls of over 25 million US employees. Workers who stayed in their jobs experienced a 6.5% pay increase in May from a year ago. For those who changed jobs, the median rise in annual pay was 12.1%, down a percentage point from the prior month and the slowest pace since October 2021.
“Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring,” Nela Richardson, the chief economist at ADP, said in a statement.
The report reaffirms a still-solid labor market that has underpinned household spending and allowed the economy to keep expanding. While layoffs that began at technology firms are extending somewhat to other industries, many companies continue to have difficulty attracting and retaining workers.
The Labor Department’s jobs report on Friday, which includes government payrolls, will provide further insight into the direction the labor market is headed. Forecasters project the government’s report to show a moderation in the pace of hiring.
Figures on Wednesday indicated demand for labor remains strong, as the number of vacancies at firms unexpectedly increased to a three-month high in April.
But there are cracks emerging in the labor market, with layoffs that began in overheated sectors including technology starting to spread to other industries such as retail and media. Separate data out this morning from Challenger, Gray & Christmas Inc. showed companies announced more planned layoffs this year through May than in all of 2022.
The ADP report’s wage growth numbers come as good news for the Federal Reserve. Central bankers are closely monitoring worker pay for clues on the inflation outlook as well as consumer demand.
Initial jobless claims last week ticked up, a separate report showed Thursday.
By Augusta Saraiva / Bloomberg