US hiring stalls in May, ADP says

Hiring in the US hit a wall last month, according to the results of one of the most closely-followed surveys on the health of the US jobs market.

According to consultancy ADP, private sector payrolls increased by only 27,000 (consensus: 178,000) in May, for the lowest initial estimate since September 2010.

Commenting on the figures, Ian Shepherdson at Pantheon Macroeconomics reasoned that some payback from April's unexpected strength, when payrolls jumped by 271,000, was always to be expected.

The size of the 'miss' relative to consensus forecasts was so large however, that on the back of Wednesday's report he cut his projection for the official non-farm payrolls tally due out on Friday to 100,000 (consensus: 190,000).

But again, while below trend, such an outcome would need to be put in the context of the 263,000 gain in jobs seen during the previous month.

Job gains were strongest among large businesses, were they increased by 68,000, ADP said, largely offset by a 52,000 drop in payrolls among small companies.

Job destruction was centred on the goods-producing sector, were hiring fell by 43,000, led by a 36,000 person drop in construction, with another 4,000 lost in natural resources and mining.

"Grim [...] ADP is not a consistently reliable guide to the initial payroll print each month - nothing is - but the message for May is pretty stark nonetheless," Shepherdson concluded.

Paul Ashworth, chief US economist at Capital Economics chipped in saying: "We would normally preach caution with big non-consensus ADP numbers because the survey doesn’t have a great track record, at least in real time.

"But the downturn does match what we are seeing in other activity indicators – both hard data and the surveys. The weakness isn’t severe enough to prompt the Fed to cut interest rates yet, but it could just be a matter of time. We still expect the first rate cut later this year."