Private sector adds 152,000 jobs in May, along with a 5% pay growth
Job gains and pay growth showed signs of softening in the latest employment data, released this week. This was encouraging to economists and investors monitoring the Fed's efforts to stave off inflation.
Job openings fell in April to 8.1 million, down from March’s revised 8.4 million to the lowest level since 2021, according to the U.S. Bureau of Labor Statistics. Despite this decrease and continued high interest rates, job openings remain at historically strong levels, a signal the economy is slowing.
Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management, was encouraged by Gross Domestic Product (GDP) growth, along with the jobs report.
“The strong job market is helping consumers play a key role in fueling ongoing economic growth,” Haworth said. "The economy continues to benefit from very low unemployment (3.9% in April) and solid job growth. In addition, there are significantly more job openings than there are available workers."
The Fed may soon shift its focus to cutting short-term interest rates, although the timing is still uncertain.
“While the Fed initially projected three 2024 rate cuts," Haworth said, "it appears more likely that we may see only one or two."
The U.S. private sector added 152,000 jobs in May, coupled with a 5% increase in annual pay year-over-year, according to the ADP National Employment Report.
“Job gains and pay growth are slowing going into the second half of the year,” said Nela Richardson, chief economist, ADP. “The labor market is solid, but we're monitoring notable pockets of weakness tied to both producers and consumers.”
The ADP attributed May’s slower job gains to a steep decline in manufacturing, as well as weaker hiring in the leisure and hospitality industries.
Meanwhile, YOY pay gains for job-changers fell to 7.8% in May, after decreasing from 10.1% to 9.3% between March and April. Pay growth for job-stayers held steady for the third month at 5%.
June’s ADP National Employment Report is expected to be released on July 3.