Temp Hiring Slowdown Depresses May Job Growth

Jun 4, 2014

ADP adds chart May 2014Slower hiring by staffing firms and others in the Professional/Business Services sector, and job losses at some mid-size companies, depressed  private sector growth to 179,000 jobs in May, far below the 215,000 estimate of economists.

This morning’s National Employment Report, issued by HR service firm and payroll processor ADP, also reduced April’s growth estimate from 220,000 to 215,000.

“After a strong post-winter rebound in April, job growth in May slowed somewhat,” said Carlos Rodriguez, president and chief executive officer of ADP. However, he noted, “The 179,000 jobs added figure is higher than May of last year and in line with the average over the past twelve months.”

Since January’s weather-impacted gain of only 127,000 private sector jobs, ADP’s monthly numbers have been rising, with each month an improvement over the previous until May. The official government report from the U.S. Department of Labor shows a roughly similar pattern, though the monthly gains differ significantly from what ADP and its forecasting partner, Moody’s Analytics, calculate.

Friday, when the Labor Department issues its initial employment numbers for May, economists expect it to show that nonfarm payrolls — government and private sector — added about 210,000 to 215,000 jobs. The ADP report covers only private sector jobs.

Drilling into the details of the report, ADP says small businesses — those with fewer than 50 employees — had the biggest payroll gain, adding 82,000 workers during May. Business from 50-499 workers added 61,000 jobs, while those with more than 1,000 workers added 40,000. Businesses with 500-999 eliminated 3,000 jobs.

Gains by industry, according to ADP:

  • Construction 14,000
  • Manufacturing 10,000
  • Trade/transportation/utilities 35,000
  • Financial activities 6,000
  • Professional/business services 46,000.

Mark Zandi, chief economist of Moody’s Analytics, observed that, “The slowing in growth was concentrated in Professional/Business Services and companies with 50-999 employees. The job market has yet to break out from the pace of growth that has prevailed over the last three years.”

Temp hiring is reported in the Professional/Business Services, and is one of the largest contributors to the numbers there. The 46,000 new jobs in the sector is the lowest increase since January, when bad weather in much of the country, kept new hiring to a meager 29,000. In April, the sector added 75,000 jobs.

Manufacturing’s job gains, however, were the strongest since December when 17,000 jobs were added. Well off the strong growth of 2011, payroll increases in the manufacturing sector nevertheless reflect the improving picture for U.S. manufacturers. Monday, the Institute of Supply Managers said its manufacturing index for May rose for the 12th consecutive month. The index is a measure of economic activity. It now stands at 55.4%, while the New Orders Index is at 56.9%, an increase of 1.8 percentage points from April’s 55.1%.

SHRM’s LINE report for May predicted the rise in manufacturing hiring. Issued at the beginning of each month, the report forecasts hiring expectations for the month ahead. For May, SHRM said 52.9% of manufacturers would add workers, a 10 point increase over May 2013. Recruiters would also find it more difficult to hire than they had a year ago.

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