Private payrolls increased by just 128,000 in May, the slowest growth of the recovery, ADP says

The pace of job creation at companies slowed in May.

Private sector employment rose by just 128,000 for the month, falling well short of the 299,000 estimate and a decline from the downwardly revised 202,000 in April, initially reported as a gain of 247,000.

It was the worst month since April 2020, when companies laid off more than 19 million workers as the Covid outbreak triggered a massive economic shutdown.

Over the past year, payrolls had increased by nearly half a million a month.

There was a slowdown in hiring in May. Fears that the U.S. could be on the verge of recession have been generated by inflation running around its highest level in 40 years, the ongoing war in Ukraine, and a Covid-caused shutdown in China.

Smaller businesses reduced payrolls by 91,000 during the month. 78,000 layoffs came from businesses with fewer than 20 employees.

Nela Richardson, chief economist of the Automatic Data Processing, said that job gains are closer to pre-pandemic levels under a tight labor market and elevated inflation. The job growth rate of hiring has slowed across all industries, while small businesses remain a source of concern as they struggle to keep up with larger firms that have been booming as of late.

The leisure and hospitality sector has been a leader in the recovery and has been hit the most by restrictions. Even as the summer tourism season begins, new hires were just 17,000 in May.

Education and health services led the way with 46,000, followed by professional and business services with 23,000 and manufacturing with 22,000. Good producers added 24,000 jobs, while service-providing jobs grew by 104,000.

Mid-size firms contributed 97,000 to the payroll gains, which was led by companies with 500 or more workers.

The Bureau of Labor Statistics is expected to show a gain of 328,000 in the nonfarm payrolls count when it is released on Friday. The unemployment rate is expected to fall to 3.5%, which would be the lowest since 1969.

The count of government jobs is different from the count of private payrolls.