Small companies fuel a private sector hiring surge in May

Dianna Christensen
June 2, 2017

The private-sector job creation figure reported Thursday by payroll firm Automatic Data Processing far exceeded analyst expectations and was well above the downwardly revised 174,000 net new positions added in April.

China's yuan, however, strengthened beyond 6.8 per dollar for the first time since November 11 after the central bank pushed its reference rate, around which the spot rate can fluctuate, 0.8 percent higher in the second-largest single-day appreciation of the currency since it was de-pegged from the dollar in 2005.

Trade, transportation and utilities added 58,000 net new jobs last month, up from just 9,000 in March. USA factory activity ticked up in May after slowing for two straight months and private employers stepped up hiring, suggesting the economy is regaining speed after struggling at the start of the year. Economists are expecting a non-farm payrolls gain of 185,000 in May alongside a steady unemployment rate of 4.4% and a 0.2% increase in average hourly earnings.

Meanwhile, a separate report from the Labor Department showed that first-time claims for US unemployment benefits rose by more than expected in the week ended May 27th.

The bears were helped in their sales by the ADP employment data from the U.S. which came in at a much stronger than expected value of 253K which throws open the door for a strong NFP report and hence a possible rate hike in June from the Fed.

"Professional and business services had the strongest monthly increase since 2014", said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in the release.

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Ian Shepherdson, an economist at Pantheon Macro, also sees potential downside risks to hourly earnings, a metric closely-watched for signs of inflation and a key measure for the Fed, given that the survey week for the report - which includes the 12th of the month - was different than the week containing the 15th of the month.

Still, the ADP report added to data this week showing an acceleration in consumer spending in April. They have now registered nine straight months of growth. "We are less confident in wages, whose growth rate remains soft relative to the sub-5% level of the unemployment rate". It is expected to do so again at its June 13-14 policy meeting. That's the longest streak since 1970.

A Labour Department official said claims for California and seven other states were estimated because of the Memorial Day holiday on Monday, which could have distorted the data.

"We have a multitude of macro news coming out today and that will set the tone for the market's direction".

A fourth report by global outplacement consultancy Challenger, Gray & Christmas showed layoffs announced by US-based employers surged 41 per cent to 51,692 in May.

Economists had forecast 180,000 jobs, according to Bloomberg.

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