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First Cut: ADP National Employment Report for May showed slower — but still massive — job losses

The 2.760 million decline in private payrolls in the ADP National Employment Report for May was far less than expected and the number of payrolls declines in April was revised down to 19.557 million (previously down 20.236 million). The relatively milder pace of job losses only indicates that conditions in the labor market are less severe for May than in the prior month, not that conditions are anywhere near normal. The downturn has been swift and deep and it will take more time for the labor market to look like more usual recessionary readings. This isn’t upward momentum so much as there are simply fewer jobs to cut after the massive adjustment in recent months. The three month average of March-May is 7.540 million job cuts.

Any implications for a better than anticipated Employment Situation for May when those numbers are released on Friday at 8:30 ET will be treated with caution. The ADP report can miss and miss by a wide margin compared to the government data. The improvement in May could be largely due to relief measures like the Paycheck Protection Program which allowed employers to recall some workers. If the economy does not pick up significantly and the program is not renewed, another huge round of layoffs could be the result.

Job cuts among goods producers were at 794,000 in May after 2.356 million in April. Job losses were particularly concentrated among manufacturing payrolls which fell 719,000. Construction was down 22,000 as builders curtailed new and planned projects. Natural resources were down 52,000 as energy prices remained depressed amid sluggish demand.

Service providers cut 1.967 million jobs in May after 17.201 in April. Job less have been particularly acute in the leisure and hospitality sector as events and travel cancellations with stay-at-home orders have kept consumers away from public-facing businesses. Job declines in leisure and hospitality slowed significantly to 105,000 in May but only after massive cuts of 7.654 million in April. Cuts in trade, transportation, and utilities remained high at 826,000 in May after 3.057 in April.

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