US companies added 201,000 to payrolls in May, according to the ADP National Employment Report. The gain represents a solid improvement over April’s 165,000 advance. Although economic growth remains modest, today’s update suggests that recession risk remains low for the US. Today’s release also strengthens the view that Friday’s official jobs report from Washington will deliver upbeat numbers.
Although the upward momentum in payrolls has decelerated lately, the year-over-year trend has wavered only slightly. For the 12 months through May, ADP’s estimate of private-sector payrolls climbed nearly 2.4%, which is line with the annual pace of growth in recent history, albeit at the low end. In other words, the labor market’s bullish 2%-plus year-over-over rise remains alive and well, which means that worries about a new recession remain premature.
“The labor market moved back up to the 200,000 jobs mark in May, a number which has been something of a bellwether for healthy employment growth,” said Carlos Rodriguez, president and chief executive officer of ADP, which generates the data in collaboration with Moody’s Analytics.
Even so, there are some glitches to consider, as Mark Zandi, chief economist at Moody’s Analytics, notes. “The only blemishes are the decline in mining jobs due to the collapse in oil prices and the decline in manufacturing due to the strong dollar.”
On balance, however, today’s results imply that the recent stumble in economic momentum isn’t deteriorating into recession. That’s also the message in yesterday’s release of May auto sales data, which increased to 17.79 million on a seasonally adjusted annualized basis—the most since mid-2005.
The US economy is clearly struggling in some respects, but the bumps don’t add up to a tipping point for the business cycle, based on the numbers to date. A key factor: the all-important growth in payrolls endures at a moderately strong rate.
In fact, measuring the broad trend across a spectrum of indicators through April points to ongoing growth, and the latest figures for May hint at a repeat performance for last month.
The future’s still uncertain, as always, but the available numbers for the recent past imply that recession risk remains low.