Private Sector Adds More Jobs than Expected in May

U.S. businesses added new workers at very modest clip in May, according to an employment survey released Wednesday. Manufacturers cut payrolls.

Private payrolls in the U.S. increased by 201,000 jobs in May, says the national employment report compiled by payroll processor Automatic Data Processing Inc. and forecasting firm Moody's Analytics.

Economists surveyed by The Wall Street Journal expected ADP would report a stronger number of 215,000 jobs added last month. The April ADP increase was revised down to 165,000 from 169,0000, a number that also had been below expectations.

The ADP report is on the list of private-sourced job reports that come out ahead of the Bureau of Labor Statistics' employment situation report scheduled for Friday. On Monday, the Institute for Supply Management reported its May surveys of manufacturers showed a small pickup in factory payrolls. On Tuesday, software company Intuit said it estimated small business hiring accelerated last month. Small firms added 25,000 new jobs in May up from 15,000 added in April.

Economists expect the BLS will report May nonfarm payrolls (which include government positions) increased by 225,000 jobs, not much different from the 223,000 slots created in April.

The May unemployment rate is projected to hold at 5.4%.

According to ADP, small businesses remain the engine of job growth. Firms employing between 1-49 workers added 122,000 new workers last month. Medium-size businesses with payrolls of 50-499 workers added 65,000 employees. Large firms with 500 or more employees hired only 13,000 more workers.

Manufacturing cut 5,000 jobs last month, said ADP. The service sector hired 192,000 new employees. Construction payrolls increased by 27,000 slots.