Private-sector hiring disappointing in May, ADP says

A private survey shows U.S. businesses added just 135,000 jobs in May, the second straight month of weak gains.

Payroll provider ADP said Wednesday that May’s gain was above April’s revised total of 113,000. But it’s much lower than the gains ADP reported over the winter, which averaged more than 200,000 a month from November through February.

Mark Zandi, chief economist at Moody’s Analytics, blamed the slowdown on higher taxes and steep government spending cuts enacted this year.

The ADP survey is derived from payroll data and tracks private employment. It has diverged at times from the government’s more comprehensive monthly jobs report, which will be released Friday. In April, the government said private employers added 176,000 jobs, much higher than the ADP’s estimate.

Economists say the gap between the ADP’s survey and the government figures has narrowed since Moody’s Analytics began compiling the numbers eight months ago. Still, it has differed from the Labor Department’s report by about 40,000 a month since then.

“The ADP survey has never been the most reliable indicator,” Paul Ashworth, an economist at Capital Economics, said in a note to clients.

Economists forecast that the government’s report will show employers added 170,000 jobs in May, according to a survey by FactSet. The unemployment rate is expected to stay at a four-year low of 7.5 percent.

Most economists said the ADP report wouldn’t prompt them to change their forecasts. Zandi acknowledged that the ADP has undershot the government’s figure in recent months.

The ADP report found that manufacturing companies cut 6,000 jobs last month. Construction firms added only 5,000, below the previous month’s 15,000 gain.

Retail hiring has also been weak, Zandi said, a sign that consumers could be spending less because of the increase in Social Security taxes.

If the government report Friday shows slower job growth, too, the Federal Reserve would be less inclined to scale back its pace of bond buying, economists said. The Fed is purchasing about $85 billion in Treasury and mortgage-backed bonds each month in an effort keep interest rates low.

Minutes of the past meeting showed that several members favored reducing the bond purchases if the economy demonstrates strong and sustained growth. And Chairman Ben Bernanke told a congressional panel last month that the Fed could slow the pace of the bond purchases over the next few meetings, if the job market shows “real and sustainable progress.”

Economists forecast growth is slowing to around a 2-percent annual pace in the April-June quarter, down from 2.4 percent in the first three months of the year.

Consumers and businesses are likely slowing their spending because of the tax increases and spending cuts. And weaker global growth has reduced demand for U.S. exports, which has slowed activity at U.S. factories.