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ADP: Job creation drops to 9-year low in May

  • Private sector companies added just 27,000 new jobs in April, according to ADP's latest monthly report.
  • The payroll processor said small businesses and goods-producing companies cut workers.
  • The May report is a big drop from April's revised gains of 271,000 new jobs.
  • The federal government's May jobs report will be released Friday.

Washington – U.S. companies last month added the fewest jobs in nine years, a private survey found, as manufacturers, construction firms and mining companies cut workers. Payroll processor ADP said Wednesday that businesses added just 27,000 jobs in May, the fewest since March 2010. Jobs in construction fell 36,000 and in manufacturing by 3,000.

Small business – 49 or fewer employees – fared the worst, losing 52,000 workers last month.

May's results are a sharp contrast to the robust job creation ADP found in April. That month's now-revised new jobs totaled 271,000.

"Following an overly strong April, May marked the smallest gain since the expansion began," Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said in a press release. "Large companies continue to remain strong as they are better equipped to compete for labor in a tight labor market."

Growth is expected to slow this year as the global economy weakens, the impact of the Trump administration's tax cuts fade and its tariffs take effect. The U.S. economy could expand at just a 1.5% annual pace in the April-June quarter, analysts forecast.

The ADP figures don't include government hiring and frequently diverge from the government's official report, which is scheduled to be released Friday. Economists expect that report will show job gains of 185,000, while the unemployment rate remains 3.6%.

But Ian Shepherdson, chief economist with Pantheon Macroeconomics, thinks ADP's report points to a weaker number from the Labor Department this week. "ADP's model is not always reliable, but this is such a big miss that we have to temper our forecast for Friday's official number; we now expect a 100K increase," he said in a research note.