Companies in the U.S. added fewer workers than forecast in May, a reminder the job market will take time to strengthen, a private report based on payrolls showed.
The 133,000 increase in employment followed a revised 113,000 gain the prior month that was smaller than initially estimated, Roseland, New Jersey-based ADP Employer Services said today. The median estimate of 39 economists surveyed by Bloomberg News called for a May advance of 150,000.
Businesses may be wary of adding workers until they see more evidence of a pickup in consumer spending, while Europe struggles with recession. A Labor Department report due tomorrow may show that private payrolls rose by 160,000 in May, and unemployment held at 8.1 percent, economists projected.
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"We hit a soft patch in the economic indicators recently, and business leaders aren't immune to that," Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. "There's very little for employers to be encouraged about in terms of adding to their workforce."
Economists' estimates in the Bloomberg survey ranged from 85,000 to 225,000 after a previously reported April gain of 119,000.
Over the previous six reports, ADP's initial figure was closest to the Labor Department's first estimate of private payrolls in April, when it understated the increase in jobs by 11,000. The estimate was least accurate in December, when it overstated the employment gain by 113,000.
Goods-producing industries, which include manufacturers and builders, added 1,000 workers in May, today's figures showed. Employment in construction declined by 1,000, while factories lost 2,000 jobs.
Service Providers
Service providers added 132,000 workers.
Companies employing more than 499 workers took on 9,000 workers. Medium-sized businesses, with 50 to 499 employees, added 57,000 and small companies increased payrolls by 67,000, ADP said.
The Labor Department's report tomorrow may show overall hiring, which includes government jobs, climbed 150,000 after rising 115,000 in April, according to the Bloomberg survey median.
The ADP report is based on data from businesses with more than 21 million workers on payrolls. Macroeconomic Advisers LLC in St. Louis produces the data with ADP.
Some companies are paring their workforce. United Technologies Corp.'s Pratt & Whitney unit said on May 24 that it is cutting 300 salaried jobs, including 200 in its home state of Connecticut.
The maker of engines for business and commercial airplanes "continuously assesses staffing levels to ensure they are in line with current business and economic conditions," Bryan Kidder, a Pratt & Whitney spokesman, said in an e-mailed statement. "These decisions are necessary to carefully manage our cost structure while continuing to invest in our future."
Federal Reserve Bank of New York President William C. Dudley said he would favor additional easing if the labor market falters or risks to growth were to rise substantially.
"If the economy were to slow so that we were no longer making material progress toward full employment, the downside risks to growth were to increase sharply, or if deflation risks were to climb materially, then the benefits of further accommodation would increase in my estimation and this could tilt the balance toward additional easing," Dudley said in a May 24 speech in New York.
His comments reinforced the view expressed at the April meeting of the central bank, when several policy makers said a loss of growth momentum or increased risks to their outlook could warrant additional action, according to minutes of the gathering.
Bloomberg News
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