ADP Private Payrolls Rise in May, as Verizon Strike Doesn't Affect Tally -- Update

By Lisa Beilfuss 

Private-sector hiring rose in May, the latest sign that the U.S. job market remains solid.

Private payrolls across the U.S. rose by 173,000 last month, said payroll processor Automatic Data Processing Inc. and forecasting firm Moody's Analytics. Economists surveyed by The Wall Street Journal expected an increase of 170,000.

The April increase, meanwhile, was revised up to 166,000 from an initially-reported 156,000.

Many economists expect that the seven-week strike at Verizon Communications Inc. hurt May payrolls. Though the strike is likely to pull down nonfarm payrolls released by the government tomorrow, it didn't affect ADP's tally.

While job creation has moderated in recent months, as energy companies and manufacturers shed jobs and as the market tightens for skilled labor, "job growth remains strong enough to reduce underemployment," said Mark Zandi, chief economist of Moody's Analytics.

Service-sector firms continued to propel job growth in May, upping hiring slightly from April and offsetting another decline in factory head counts. While manufacturing conditions have improved in recent months, many firms have been waiting for signs the recovery would stick before adding works and some have had trouble locating the right workers.

Small firms continued to hire at a better clip than bigger businesses more affected to the global economic slowdown and currency headwinds. America's smallest companies added 76,000 workers last month, down from April but still outpacing hiring by medium and large businesses.

May's private payrolls report reflects "a solid though not spectacular amount of jobs in May," said Chris Rupkey, chief financial economist at MUFG Union Bank. Mr. Rupkey notes low layoff levels as further evidence of a tight labor market, and other data including initial claims for jobless benefits continue to illustrate a solid labor market.

The ADP report precedes the Bureau of Labor Statistics' May employment-situation report, due out Friday morning and the last one before the Federal Reserve's June 15 rate decision. ADP lags behind the government's initial private payroll estimate by a month, and it doesn't aim to replicate the nonfarm payrolls survey.

In its report released yesterday on regional economic conditions, known as the beige book, the Fed said "tight labor markets were widely noted in most districts." Fed Chairwoman Janet Yellen has said a rate increase would be appropriate "probably in the coming months" if the economy and labor market continue to strengthen.

Economists polled by The Wall Street Journal expect the BLS to report an increase of 158,000 nonfarm payrolls, little changed from April and reflecting the Verizon strike. The unemployment rate is expected to hold steady at 5%.

The strike didn't show up in ADP's report because Verizon doesn't use ADP as a payroll processor, and ADP said it didn't adjust its report to account for the strike.

Write to Lisa Beilfuss at [e-mail]

(END) Dow Jones Newswires

June 02, 2016 09:30 ET (13:30 GMT)

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