ADP Employment Report Shows Big May Jobs Gains, Slowing Wage Growth

The U.S. economy experienced a surge in new private sector hiring last month, payroll processing group ADP said Thursday, suggesting the broader job market remains firmly resistant to the Federal Reserve's inflation-focused rate hikes.

ADP said in its National Employment Report that private sector jobs grew by 278,000 last month, well ahead of Street forecasts of a 170,000 gain, using the new methodology developed last summer that ADP says will provide a "more robust, high-frequency view of the labor market and trajectory of economic growth."

Wages gains for those staying at the same job slowed to 6.5%, ADP said, while gains for job-changers fell to 12.1%.

“This is the second month we've seen a full percentage point decline in pay growth for job changers,” said ADP's chief economist Nela Richardson. “Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.” 

In a separate report Thursday, the Labor Department said weekly jobless claims rose modestly to 232,000, just shy of analysts' estimates of a 235,000 tally.

The National Federation of Independent Businesses will also publish its monthly report on hiring intentions, seen as a good predictor of the Labor Department's non-farm payroll tally, at 1:00 pm eastern time.

Friday's May employment report, due at 8:30 am eastern time, is also forecast to show a notable decline in hiring compared to the previous month, with 180,000 new positions created and monthly average hourly earnings easing to 0.4%.

U.S. stocks pared gains immediately following the data release, with futures contracts tied to the S&P 500 priced for a 2 point opening bell gain and those linked to the Dow Jones Industrial Average indicating a 35 point dip.

Benchmark 10-year Treasury notes yields were last seen 2 basis point lower at 3.624%, while 2-yeat notes eased 4 basis points to 4.438%. The U.S. dollar index was marked 0.13% lower at 104.189 against a basket of its global currency peers.

Data from the Bureau of Labor Statistics, published Wednesday, showed that 10.1 million jobs were left unfilled over the month of April, a more than 5% uptick from the 9.59 million tally in March.

The increase from March levels caught markets by surprise after data showing accelerated layoffs in the tech, retail and banking sectors from Challenger Gray & Christmas and and suggests the labor market will carry its resilience into the summer months, potentially forcing employers to increase wages and further complicating the Federal Reserve's effort to bring inflation back closer to its 2% target.

Bets on a June rate hike, meanwhile, held at around 33.2%, according to CME Group's FedWatch, following both the Jolts jobs data and comments from incoming vice chairman Philip Jefferson, who suggested the central bank is prepared to pause its rate-hike cycle next month in Washington in order to better assess the impact of the 500 basis points of increases its put into place over the past 14 months.