ADP Automatic Data Processing Inc

By Xavier Fontdegloria

The nonfarm private sector in the U.S. added to payrolls in May at a faster pace than in April despite increasing signals about labor supply constraints.

Total U.S. nonfarm private employment increased by 978,000 in May, data from ADP National Employment Report showed Thursday. Economists polled by The Wall Street Journal were expecting payrolls to rise by a lower figure of 680,000.

In April, the U.S. private sector added 654,000 jobs, down from an initial estimate of 742,000.

"Private payrolls showed a marked improvement from recent months and the strongest gain since the early days of the recovery," said Nela Richardson, chief economist at ADP.

Payroll growth is set to accelerate over the next few months as millions of people are hired back into the hospitality, travel and retail sectors, economists say. However, recent surveys and other data point to labor shortages as firms struggle to fill their open positions.

Companies of all sizes experienced an uptick in job growth, reflecting the improving nature of the pandemic and economy, she said.

Medium businesses, between 50 and 499 employees, added 338,000 jobs, ADP said. Small businesses, with a maximum of 49 employees, registered 333,000 payroll gains and large businesses, those of at least 500 workers, created 308,000 jobs.

The service-providing sector created the majority of jobs, 850,000. Most of the gains were registered in the leisure and hospitality sector, which added 440,000 jobs. Education and health services gained 139,000 payrolls.

The goods-producing sector added 128,000 jobs, with 65,000 in construction, 52,000 in manufacturing and 11,000 in natural resources and mining.

"While goods producers grew at a steady pace, it is service providers that accounted for the lion's share of the gains, far outpacing the monthly average in the last six months," Ms. Richardson said.

The report, carried out by the ADP Research Institute along with Moody's Analytics, is based on data through the 12th of the month.

The U.S. Department of Labor is expected to release its May employment report, which covers the same period as the ADP National Employment Report, on Friday. Economists are expecting it to show nonfarm payrolls up by 671,000 for the month and the unemployment rate down to 5.9%, but the less-than-expected reading in April reflects heightened uncertainty surrounding May's report. The ADP series can diverge considerably from the Labor Department's data on a monthly basis.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

June 03, 2021 08:50 ET (12:50 GMT)

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