Private payrolls grew by 122,000 in May, stronger than expected, ADP reports

• Eight of 10 sectors tracked by ADP saw gains, led by education and health services with 57,000 hires, followed by trade, transportation and utilities with 36,000 additions
• Annual pay growth held steady at 4.4% for workers staying in jobs, while job-switchers saw pay increases rise to 6.6%
• Small companies (under 50 employees) led hiring with 67,000 additions, while the official BLS nonfarm payrolls report expected Friday is forecasted to show only 80,000 jobs added

Summary: Private Payrolls Exceed Expectations in May

Key Figures:

ADP reported private sector employment increased by 122,000 jobs in May, exceeding the Dow Jones consensus estimate of 110,000 and surpassing April's revised 105,000 (down 4,000 from initial report). This marks the strongest hiring month since January 2025.

Sector Performance:

Unlike recent months where healthcare dominated job growth, May saw broad-based gains across eight of ten tracked sectors:

• Education and health services led with 57,000 hires
• Trade, transportation, and utilities added 36,000
• Professional and business services contributed 11,000
• Construction and leisure/hospitality each added 8,000
• Information services lost 9,000 (potentially AI-related)
• Natural resources and mining declined by 3,000

Company Size Distribution:

Small companies (under 50 employees) drove hiring with 67,000 new positions, while large firms (500+ employees) added 40,000, and mid-sized companies contributed 17,000.

Wage Growth:

Annual pay increased 4.4% for workers staying in their positions, unchanged from April. Job-switchers experienced stronger gains at 6.6%.

Market Implications:

The robust data suggests continued labor market stability heading into summer. The report precedes Friday's Bureau of Labor Statistics nonfarm payrolls release, expected to show 80,000 jobs added with unemployment holding at 4.3%. Federal Reserve officials will closely monitor employment data before their June 16-17 policy meeting, though markets anticipate the Fed will maintain interest rates at 3.5%-3.75%. ADP Chief Economist Nela Richardson noted this represents the most broad-based hiring in recent years, indicating "sustained momentum."