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ADP: Businesses added 173,000 jobs in May

The private sector added 173,000 jobs in May, payroll processor ADP said Thursday, possibly signaling that a government report will reveal tepid employment growth for a second straight month.

The private sector added 173,000 jobs in May, payroll processor ADP said Thursday, possibly signaling that a government report will reveal tepid employment growth for a second straight month.

The total matched the estimate of economists surveyed by Bloomberg. Economists estimate the Labor Department’s survey of the public and private sectors, due out Friday, will count 160,000 new jobs. Labor's total, however, is expected to be suppressed by the now-settled Verizon strike, which idled about 40,000 employees. As a result, a 160,000 advance Friday would be a solid showing -- equivalent to 200,000 in a normal month.

By contrast, ADP’s figure is unaffected by the walkout because the payroll processor counts workers as employed even if they aren’t paid in a given week, says economist Jim O’Sullivan of High Frequency Economics.

ADP said small businesses added 76,000 jobs, midsize firms, 63,000, and large companies, 34,000. Professional and business services led the hiring, adding 43,000 jobs, followed by trade transportation and utilities, with 28,000, and construction, 13,000. Manufacturers, still coping with economic troubles abroad and an oil industry slump, laid off workers again, cutting 3000 jobs.

“Job growth has moderated this spring as energy companies and manufacturers shed jobs,” said Mark Zandi, chief economist of Moody’s Analytics, which helps ADP compiled the report.

ADP’s monthly total doesn't necessarily foreshadow the Labor report. It has varied from Labor’s by average 31,000 over the past two years, but the firm has been closer to the mark the last three months, with an average gap of 16,000, O’Sullivan says.

Labor’s last report showed job growth slowing to 160,000 in April from more than 200,000 in March. And the monthly average of 192,000 so far this year is down from 229,000 in 2015. A weak global economy and low oil prices have hurt manufacturers and energy producers. Consumer spending had more than offset those drags, but even that sputtered early this year, helping dampen economic growth for a second straight quarter.

Consumption, however, picked up in April and the economy is expected to accelerate in the current quarter, leading many analysts to predict job growth will resume its 200,000-plus pace the rest of the year. Some economists, however, believe that with unemployment at a near-normal 5%, the pool of available workers is smaller and payroll growth is likely to slow.

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