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Private payrolls add 253K in May vs. 185K est.: ADP

  • Companies added 253,000 new jobs in May, well above expectations of 185,000 and April's 174,000.
  • Big growth areas were construction and professional and business services.

Job creation surged in May thanks to a jump in construction positions and a boom in professional and business services, according to a report Thursday from ADP and Moody's Analytics.

Private payrolls increased by 253,000, well ahead of expectations. Economists surveyed by Reuters expected the report to show that private payrolls grew by 185,000 in May from 174,000 in April.

The growth "is three times the rate of the growth in the underlying labor force," Mark Zandi, the chief economist at Moody's Analytics, told CNBC. "So that means the unemployment rate, which is 4.4 percent, is quickly headed to 4 percent. This labor market is rip-roaring and getting really tight."

Services broadly led the way with 205,000 new jobs, with professional and business services contributing 88,000 — its best month in about three years — and education and health services adding 54,000.

Construction added 37,000 as the building season kicks into full gear, while manufacturing grew by 8,000 and there were 3,000 new mining jobs. Mining has been one of the cornerstones of President Donald Trump's economic agenda, though critics doubt he can fulfill campaign promises to bring jobs back to the industry.

Trade, transportation and utilities was another big growth area, with 58,000 positions, while franchises add 18,400 new workers.

The two areas showing losses were leisure and hospitality, which posted a rare decline of 11,000, and information services, which fell by 8,000.

In all, it was the fourth time this year and sixth in tseven months that the ADP count put total job creation above 200,000. Over the past 12 months, private payroll growth has averaged 211,000. April's count was revised down by 3,000.

The report comes amid a growing chorus of economists who doubt the Trump administration can achieve its goal of 3 percent annual GDP growth in part because the labor market is reaching full employment. Despite a 4.4 percent unemployment rate, there have been only limited inflation pressures, with the Labor Department reporting hourly wage growth of 2.5 percent in April.

The ADP report serves as a precursor to Friday's nonfarm payrolls count from the Bureau of Labor Statistics. Payroll growth is expected to come in around 176,000, down from the previous month's 211,000.

Economists occasionally will adjust their estimates off the ADP numbers, though the two counts can have wide disparities.

According to ADP, medium-sized businesses, with 50 to 499 employees, accounted for the most growth — 113,000 new jobs. Small firms added 83,000 while big business contributed 57,000.

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