Wednesday, June 5, 2019Private-sector payroll numbers for May posted a huge drop from April, and from every month in 2019 so far: ADP (ADP - Free Report) said 27K new jobs were created last month, far below the range of 170-180K expected. It’s also roughly 10% of April’s downwardly-revised 271K.
This marks the lowest monthly total for ADP since February 2010, when private-sector jobs were just starting to emerge from deep gouges month after month. The news has struck pre-market futures as well, swinging from +170 points on the Dow to just +77 now.
That said, this figure can be read more as an adjustment than the start of a new down-trend. Analysts had been looking for job growth to slow for quite some time, but it just wasn’t showing up in the data. Now, however, if you average out the past 3 months, we arrive at 152K jobs per month — exactly in-line with predictions. In fact, even the 200K+ jobs numbers we had been enjoying have tapered off over the last 6 months, averaging 198K over that time.
None of this should shatter any investors’ world view; this late in the employment recovery cycle, a slowdown in new hires had been widely expected. May’s number is likely overstating the weakness of the current jobs market, but almost every month in 2019 previous had been overstating it.
Small businesses lost 52K new jobs on the month, as labor shortages began to show up in the data, partially derived from the ongoing trade war with China. Small companies simply cannot compete with its bigger competition, which can offer better benefits and location comparatively. This is especially true with small retail boutiques and construction contractors — Construction by itself lost 36K private-sector jobs last month.
Manufacturing also slipped by 3K in May; we don’t expect the new tariffs on Mexican goods next week to give this number a boost, considering how much taxed Mexican components will affect finished U.S. goods. Education/Healthcare led the way again, followed by Leisure/Hospitality, though Professional/Business Services fell off drastically from a big showing earlier this year.
What this means for Friday’s non-farm payroll report from the U.S. Bureau of Labor Statistics (BLS) is anyone’s guess. Over time, the ADP and BLS numbers tend to correlate, but in real time they can be wildly disparate. Currently, expectations are — again — for 170-180K new jobs for the month, but this estimate was recoerded before the 27K headline from ADP this morning.
Mark Vickery
Senior Editor
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Wednesday, June 5, 2019
Private-sector payroll numbers for May posted a huge drop from April, and from every month in 2019 so far: ADP (ADP - Free Report) said 27K new jobs were created last month, far below the range of 170-180K expected. It’s also roughly 10% of April’s downwardly-revised 271K.
This marks the lowest monthly total for ADP since February 2010, when private-sector jobs were just starting to emerge from deep gouges month after month. The news has struck pre-market futures as well, swinging from +170 points on the Dow to just +77 now.
That said, this figure can be read more as an adjustment than the start of a new down-trend. Analysts had been looking for job growth to slow for quite some time, but it just wasn’t showing up in the data. Now, however, if you average out the past 3 months, we arrive at 152K jobs per month — exactly in-line with predictions. In fact, even the 200K+ jobs numbers we had been enjoying have tapered off over the last 6 months, averaging 198K over that time.
None of this should shatter any investors’ world view; this late in the employment recovery cycle, a slowdown in new hires had been widely expected. May’s number is likely overstating the weakness of the current jobs market, but almost every month in 2019 previous had been overstating it.
Small businesses lost 52K new jobs on the month, as labor shortages began to show up in the data, partially derived from the ongoing trade war with China. Small companies simply cannot compete with its bigger competition, which can offer better benefits and location comparatively. This is especially true with small retail boutiques and construction contractors — Construction by itself lost 36K private-sector jobs last month.
Manufacturing also slipped by 3K in May; we don’t expect the new tariffs on Mexican goods next week to give this number a boost, considering how much taxed Mexican components will affect finished U.S. goods. Education/Healthcare led the way again, followed by Leisure/Hospitality, though Professional/Business Services fell off drastically from a big showing earlier this year.
What this means for Friday’s non-farm payroll report from the U.S. Bureau of Labor Statistics (BLS) is anyone’s guess. Over time, the ADP and BLS numbers tend to correlate, but in real time they can be wildly disparate. Currently, expectations are — again — for 170-180K new jobs for the month, but this estimate was recoerded before the 27K headline from ADP this morning.
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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