The ADP National Employment Report shows U.S. businesses added 253,000 workers in May. That result follows a revised 174,000 gain in April and makes May the sixth month in the past seven when private payrolls increased by more than 200,000. The ADP figures may not match the data from the national employment report from the Bureau of Labor Statistics each month (due out Friday, June 2), but the trends tend to be similar. However, over the past seven months, the ADP tabulation has been noticeably stronger than the BLS Employment Situation Report.
Among the industries shown in the ADP report, goods-producing businesses added 48,000 jobs, led by a 37,000 increase in construction jobs, while service industries’ payrolls rose by 205,000. Among the service industries, strong gains were seen in trade, transportation, and utilities (+58,000), professional and business services (+88,000), and education and health services (+54,000).
The ADP report also shows payrolls by company size. Small businesses, those with less than 50 employees, added 83,000 jobs in May, while midsized businesses, those with 50 to 499 employees, added 113,000 workers and large businesses, those with 500 or more employees, added 57,000 workers.
Overall, the ADP report suggests continued strong gains in employment across the economy. Confirming this conclusion are the ongoing low level of initial claims for unemployment insurance and a favorable reading from the Institute for Supply Management’s Manufacturing Report on Business.
The Employment and Training Administration within the Bureau of Labor Statistics reported that claims for the week ending May 27 rose 13,000 to 248,000 from 235,000 in the prior week. The four-week average, used to help smooth out weekly volatility, was 238,000, a rise of 2,500 from 235,500 in the prior week. Claims below 300,000 for unemployment insurance is considered low by historical standards. Despite the rise in the latest week, initial claims have been below 300,000 for 117 consecutive weeks, the longest stretch since the 1970s.
The ISM’s Purchasing Managers Index came in at 54.9 in May, up 0.1 from 54.8 in April, making May the ninth consecutive month above the neutral 50 level. The employment index rose 1.5 points to 53.5 from 52.0 in April and makes May the eighth straight month with positive results. Other notable results from the report include a 2.0 point rise to 59.5 in the new-orders index and a reading of 57.1 for the production index, though that is down 1.5 points from the previous month.
Today’s reports all suggest the labor market and the economy in general are continuing to strengthen. They also support current market expectations for another rate hike by the Fed at its June 13–14 meeting, and should be seen as positive news for equity markets because continued economic expansion should support further earnings growth and equity prices.