The first-quarter contraction didn’t bring job creation to a halt, according to today’s ADP report on private-sector employment in May, but it didn’t boost it either. 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:

Private sector employment increased by 179,000 jobs from April to May according to the May ADP National Employment Report®. Broadly distributed to the public each month, free of charge, the ADP National Employment Report is produced by ADP®, a leading global provider of Human Capital Management (HCM) solutions, in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. …

Goods-producing employment rose by 29,000 jobs in May, up from 21,000 jobs gained in April. The construction industry added 14,000 jobs over the month, down slightly from 16,000 in April. Meanwhile, manufacturing added 10,000 jobs in May, up from April’s 2,000 and the largest number since December last year.

Service-providing employment rose by 150,000 jobs in May, down from 194,000 in April. TheADP National Employment Report indicates that professional/business services contributed the most to the lower overall number in May — adding 46,000 jobs, down from 75,000 in April. Expansion in trade/transportation/utilities grew by 35,000, the same number of jobs added in April. The 6,000 new jobs added in financial activities was down slightly from 8,000 last month.

“After a strong post-winter rebound in April, job growth in May slowed somewhat,” said Carlos Rodriguez, president and chief executive officer of ADP. “The 179,000 jobs added figure is higher than May of last year and in line with the average over the past twelve months.”

The ADP chart on job creation over the past 13 months substantiates that analysis, as far as it goes:

adp-13mos-2014-05

 

This is a problem for a couple of reasons. First, the levels shown over the past year are all still stagnation levels, with the possible exception of November 2013, and only maybe so. The US economy has to add 150,000 jobs a month in order to keep up with population growth. If we’re averaging ~180,000 a month, we’re only treading water.  In order to get the millions of people sidelined by the Great Recession and the five-year stagnation that has followed, we need sustained monthly job growth in the 300K-400K range for months, if not a couple of years. 

Second, the ADP report is usually (although not always) sunnier than the official BLS numbers, which come out on Friday. The White House has touted the mild uptick in hiring this winter and spring as a sign of an American economic revival that’s just around the corner. If the BLS figure comes in short of this, and especially if it’s under 150K, that Q1 contraction will start looking less like the anomaly the White House claims and more like the indicator it really was.

CNBC’s Jeff Cox calls this result “disappointingly slow”:

Job creation in the private sector was disappointingly slow in May, with companies adding just 179,000 positions, according to the latest reading from ADP and Moody’s Analytics.

Economists in a consensus survey expected ADP’s national employment report to show the economy created 215,000 private payrolls in May, down from the prior month’s 220,000 figure.

The number could cause economists to ratchet down the projections for Friday’s nonfarm payrolls report, which is projected to show an addition of 210,000 positions for the month. Capital Economics said in a note that the ADP report “adds to the downside risk” for its forecast of 230,000 jobs created.

Reuters briefly noted that the ADP measure missed expectations. USA Today’s Paul Davidson suggests that this might be a slowdown from previous “strong gains”:

Business added 179,000 jobs in May, payroll processor ADP said Wednesday, possibly signaling a labor market that slowed after notching strong gains in recent months.

Economists had estimated ADP would report about 210,000 job gains last month,according to the median forecast in Action Economics’ survey.

That would be the 288,000 jobs added in the April report, which were accompanied by 806,000 people leaving the labor force, a rather mixed bag rather than “strong gains” overall for the economy. We’ll see if the BLS gives us better news on Friday, but I’d also watch to see if those April numbers get a downward revision.