Private sector hiring and pay growth slowed in May

The jobs market showed signs of a slowdown last month as the private sector added 152,000 jobs in May, while annual pay grew 5% year over year, payroll giant ADP reported Wednesday.

The professional and business services sector, which includes accounting and tax preparation, lost 6,000 jobs last month. The manufacturing industry suffered even steeper declines, losing 20,000 jobs in May. Even the leisure and hospitality sector had weaker hiring, gaining just 12,000 jobs last month despite the approach of summer. The financial activities sector, which includes banking, had more positive signs, adding 28,000 jobs for the month. The service-providing sector overall added 149,000 jobs, while the goods-producing sector gained 3,000 jobs overall, mainly due to the 32,000 jobs gained in the construction industry offset by losses in manufacturing and natural resources mining.

ADP sees a deceleration in hiring from the previous three months. “While in normal economies 152,000 jobs would be a very solid report, and it’s still a solid report, there’s a lot more going on underneath that number that we’re monitoring,” said ADP chief economist Nela Richardson during a conference call Wednesday with reporters. “My overall message for this report is good, not great.”

Small businesses lost 10,000 jobs in May, especially in businesses with between 20 and 49 employees, where 36,000 jobs were cut, partially offset by a gain of 26,000 jobs at businesses with between one and 19 employees. Medium size establishments added 79,000 jobs, including 49,000 in companies with between 50 and 249 employees and 30,000 in businesses with between 250 and 499 employees. Large establishments with 500 employees or more added 98,000 jobs.

Year-over-year pay gains for people who changed jobs declined for the second month in a row. Pay for job-changers was up 7.8% while pay growth for those who stayed in their jobs held steady for the third consecutive month at 5%. In the professional and business services sector, the rate of pay growth for job stayers was 4.8%.

This summer, ADP expects to see more hiring of part-time workers. “We’ve seen an increase in part-time employment,” said Richardson. “The part-time numbers have grown by 4% compared to last year, and we’ve seen a deceleration in median weekly hours. That is down a bit from last year, so people are working a little less. They’re making up for it because their pay has grown proportionately. Overall it’s a solid number, but right now it’s going to be interesting to understand if the economy is running out of gas or coasting into summer college hiring.”