Job creation didn’t come to a standstill in the first quarter despite the fact that the economy shrank by 1%, but the Automatic Data Processing Inc. forecast for May job creation is troubling on the face of it and indicative of just how weak the economy really is.
Despite all the “pent-up demand” traditional pundits have been crowing about, May’s numbers are seriously weak, and that’s coming from an optimistic report.
ADP estimates that private-sector employers created 179,000 jobs for the month, the lowest figure in four months and second-lowest in the past twelve months.
At 179,000 – if accurate – that’s stagnation level job creation.
But worse, ADP is traditionally one of the more optimistic predictions – which suggests either they made some serious changes to their methods, or else if they follow the past trend the actual numbers on job creation that will be released Friday may be below 150,000 or worse.
The economy must add 150,000 jobs a month in order to keep up with population growth. At the current average of less than 180,000, that’s well below the 300,000-400,000 rate needed to recover from the job losses since 2009.
If the numbers on Friday are below 150,000, that will give weight to analysts and economists who say no, that contraction in the first quarter was serious, and it’s a sign of where the economy is going rather than an outlier.
Less optimistic analysts are also saying that they expect April’s job creation numbers to be revised downwards.
Optimistic economists, meanwhile, are predicting more than 215,000 jobs, only slightly down from the unrevised April figure of 220,000. Capital Economics is actually predicting 230,000 jobs in May.
Of the ADP numbers based on actual payroll data but limited to the company’s client base, services accounted for most of the jobs, adding 150,000 to the total, while goods-producing employment increased by 29,000.
In the services sector, though, there was weakness, with new professional and business positions tumbling to 46,000 from 75,000 in April.
Construction grew by 14,000, manufacturing rose 10,000 and financial activities gained 6,000.