The ADP national employment report shows private payrolls up 152,000 in May after a small downward revision to 188,000 in April. The April change is below the consensus of up 173,000 in the Econoday survey of forecasters. Increases in payrolls appear to be trending lower in the past two months, although payroll growth remains consistent with a healthy labor market.

Increases in goods-producers' payrolls are a mere 3,000 in May as a jump of 32,000 in construction hiring was nearly wiped out by a decline of 20,000 in manufacturing and 9,000 in natural resources/mining.

Service-providers' payrolls are up 149,000 in May with increases of 55,000 in trade/transportation/utilities, 46,000 in education/health services, 28,000 in financial activities, 21,000 in"other" services, and 12,000 in leisure/hospitality. This was offset slightly by declines of 7,000 in information and 6,000 in professional/business services.

Hiring by establishment size shows that small firms (1-49 employees) decreased hiring by 10,000 while hiring rose 79,000 at medium sized firms (50-499 employees) and 98,000 at large companies (98,000). It isn't clear whether smaller firms are cutting back, or if they are again at a competitive disadvantage in attaching the workers they need.


The data on pay insights for May shows that the median change in pay year-over-year for job-stayers is unchanged at 5.0 percent for the past three months. Although the pace of increases has moderated, those remaining in their current job are seeing modest increases in compensation. The median change in pay year-over-year for job-changes continues to outpace that for job-stayers, but is decelerating somewhat. The year-over-year change in May is 7.8 percent compared to 8.0 percent in April and 8.3 percent in March.

Forecasters see ADP's May employment number at 173,000. This would compare with April growth in private payrolls reported by the Bureau of Labor Statistics of 167,000. ADP's number for April was 192,000.

The national employment report from Automated Data Processing Inc. is computed from ADP payroll data and offers advance indications on the U.S. workforce. ADP's data cover more than 500,000 companies totaling more than 25 million employees. The report is produced by ADP Research Institute in collaboration with Stanford Digital Economy Lab.

Market players have become accustomed to the excitement on employment Friday and realize the rich detail of the monthly employment situation can help set the tone for the entire month. While economists have improved their nonfarm payroll forecasts over the years, it is not unusual to see surprises on employment Friday. To that end, the ADP's national employment report can help improve the payroll forecast by providing information in advance of the employment report.

The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.

By tracking jobs, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.