Companies in U.S. Added Fewer Workers Than Forecast in May

Companies in the U.S. hired fewer workers than projected in May as federal budget cuts and higher taxes stifled greater improvement in the labor market.

The 135,000 increase in employment followed a revised 113,000 gain in April that was smaller than initially estimated, the ADP Research Institute reported today. Based in Roseland, New Jersey, the institute is a division of Automatic Data Processing Inc., a company that manages employer payrolls. The median forecast of 40 economists surveyed by Bloomberg called for a May advance of 165,000.

Companies added workers last month as home prices strengthened and consumer demand for cars, electronics and other goods held up in the face of this year’s higher taxes and federal budget cuts. A Labor Department report in two days may show private payrolls rose by 178,000 last month, according to the Bloomberg survey median forecast.

“The job market continues to expand, but growth has slowed since the beginning of the year,” Mark Zandi, chief economist at Moody’s Analytics Inc., in West Chester, Pennsylvania, said in a statement. Moody’s produces the figures with ADP. “The softer job market this spring is largely due to significant fiscal drag from tax increases and government spending cuts.”

Estimates in the Bloomberg survey ranged from gains of 110,000 to 200,000. April’s figure was revised from a previously reported increase of 119,000.

Manufacturers, construction companies and other goods-producing industries decreased payrolls by 3,000. Construction employment rose by 5,000 and factories lost 6,000 jobs, today’s report showed. Payrolls at service providers climbed by 138,000.

Large Companies

Companies employing more than 499 workers added 39,000 jobs. Employment at businesses with 50 to 499 employees rose 39,000 and the smallest companies increased payrolls by 58,000, the report showed.

ADP in October changed the method it uses to calculate its employment figures dating back to 2001. The report now is derived from a larger sample and is released jointly with Moody’s Analytics.

The Labor Department may report on June 7 that payrolls, including government jobs, climbed 167,000 in May after a 165,000 increase in April, according to the Bloomberg survey median. The jobless rate held at a four-year low of 7.5 percent, economists projected.