U.S. job market's resilience provides leeway for the Fed to act to take on inflationary pressure engendered by the Iran conflict.
Updated to include market reaction and further details from the report.
The U.S. private payrolls expanded by more than expected in May, the results of ADP survey published Wednesday showed. The data is another confirmatory signal for the resilience of the labor market, which continues to hold up despite the looming geopolitical and macroeconomic challenges.
The S&P 500 E-Mini futures (ES) steepened its losses immediately after the report but has since cut some of its losses, and the Dollar Index climbed sharply as traders firm up expectations for an unchanged stance at the June 16-17 Federal Open Market Committee (FOMC) meeting. The Fed funds rate, or the benchmark interest rate, currently stand at 3.50%-3.75%.
Job Gains Exceed Estimates
- The private sector added 122,00 jobs in May compared to April’s downwardly revised 105,000 reading (was initially reported at 109,000); consensus 118,000; The May reading marked the biggest job growith since January 2025.
- Eight out oif the 10 supersectors recorded job gains.
- Sectors adding most jobs: education and health services (+57K), construction (+8K), trade, transportation and utilities (+36K), professional and business services (+11K), leisure and hospitality (+8K)
- Manufacturing jobs expanded by 3K.
Source: ADP
Commenting on the report, ADP Chief Economist Nela Richardson said, “Hiring was more broad-based in May than we've seen in the last few years." "The labor market continues to show sustained momentum going into the summer hiring season."
Pay Growth Steady
ADP's survey showed that the year-over-year (YoY) pay growth for job-stayers remained unchanged at 4.4%. For job-changers, the pace of wage growth was a steeper 6.5%, down from 6.6% in April.
Read-Across for Friday’s Non-farm Payrolls (NFP) Report
The Bureau of Labor Statistics’s monthly jobs report due on Friday is set to show that the U.S. economy added 95,000 jobs, a smaller number relative to April’s gain of 115,000. The jobless rate, however, is expected to remain unchanged at 4.3% and the average weekly earnings growth is set to rise at a slower YoY rate of 3.5%.
The ADP and the NFP reports are not in perfect sync with each other, going by their historical correlation. That said, the reports often match directionally.
U.S. job market's resilience provides leeway for the Fed to act to take on inflationary pressure engendered by the Iran conflict.
The April Job Openings and Labor Turnover (JOLTS) survey results released Tuesday showed a pick up in job openings to a two-year high, with the increase concentrated in professional and business service jobs. Incidentally, the May ADP report showed the industry adding jobs, reversing the trend seen in the previous month.
On the other hand, the hires, quits and layoffs rates declined month over month, dropping to the near lowest of the current expansion.
Economists Hold Mixed View for NFP Data
Fifth Third Commercial Bank expects job gains roughly in line with the consensus. The bank said its expectations suggest job growth would hold near the pace averaged since the start of the year, and better than in 2025,
It should exceed the 25K-50K monthly pace needed to keep up with the very modest growth of jobseekers, which have slowed dramatically due to immigration restrictions and an aging workforce, the firm stated.
Morgan Stanley economists, meanwhile, forecast job gains of 65,000 for the month, with federal government layoffs remaining a drag on the headline payrolls, and the transportation sector also likely experiencing some softness. The firm premised its expectations on labor market data which have suggested little change in underlying conditions in May: new jobless claims remained low and continuing claims fell, suggesting still very slow layoffs.
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