US Private Hiring Slows in May Amid Worker Shortage

U.S. businesses slowed hiring in May, amid an ongoing struggle to find workers and high inflation, according to an industry survey Thursday.

Payroll services firm ADP said private employment rose by 128,000 positions last month, far less than economists expected and well below from April's total.

The survey is considered a preview of the key government jobs report due out Friday.

Although unemployment has fallen nearly to the level seen before Covid-19 caused mass layoffs two years ago, ADP's data could foreshadow weaker hiring last month in the U.S. economy.

"Under a backdrop of a tight labor market and elevated inflation, monthly job gains are closer to prepandemic levels," ADP chief economist Nela Richardson said in a statement.

Hiring has begun to level off across all industries, though she said small businesses "remain a source of concern as they struggle to keep up with larger firms that have been booming as of late."

Businesses with less than 50 employees actually shed workers for the fourth month in a row, with the smallest firms struggling most, and the losses have picked up speed, according to the report.

The U.S. economy has seen consumer prices surge at the fastest pace in more than 40 years as supply chain snarls brought on by the pandemic were exacerbated by Russia's invasion of Ukraine, while a scarcity of workers pushes up wages.

The Federal Reserve has started aggressively raising interest rates to cool the economy, raising the benchmark lending rate three quarters of a percentage point since March and signaling more big increases are coming.

ADP said large businesses added the bulk of the new positions last month, with 122,000 new hires.

The dominant service sector was the biggest source of the job gains, with 104,000, as the smaller goods-producing sector gained just 24,000.

Most of those roles in services were in education and health, which added 46,000. Leisure and hospitality, which includes bars and restaurants that suffered greatly during the pandemic, saw significantly reduced growth from April, adding only 17,000.

Rubeela Farooqi of High Frequency Economics said despite the shortage of employees, job growth should "remain on an upward trajectory."

"But the pace is likely to slow as the Fed continues to raise rates over the coming months," she said in an analysis.