WASHINGTON -- Private-sector job growth picked up slightly in May, but the 135,000 positions added by employers fell well short of expectations and showed the labor market is struggling in the face of tax increases and federal spending cuts.
The widely watched monthly report from payroll processing firm ADP on Wednesday showed that the pace of job growth has slowed in recent months as Washington's belt-tightening spilled into the private sector.
"Instead of accelerating, which of course is what everyone would like to see, we are decelerating in job growth going into the spring and summer," said Mark Zandi, chief economist at Moody’s Analytics, which assists ADP with the monthly report.
The May figure was up from 113,000 the previous month. But the April total was revised down from 119,000, and economists had projected a more significant pick-up last month to about 165,000 net new jobs added in the ADP report.
The private-sector data don't bode well for the government's May jobs report, to be released on Friday. The ADP figures suggest the economy added about 150,000 net new jobs last month, well short of the pace needed to bring down unemployment significantly, Zandi said.
"It feels like we’re throttling back a little bit" on job growth, he said.
The Labor Department reported the economy added 165,000 net new jobs in April and the unemployment rate ticked down to 7.5%. Economists surveyed by Bloomberg News have been expecting similar job growth in May, with about 167,000 net new jobs added.
The ADP report showed slower job growth across all industries. The manufacturing sector shed 6,000 jobs in May as the automatic federal spending cuts known as sequestration have hit factories and export growth has been weak as Europe struggles with recession.
The construction industry added 5,000 net new jobs, but that growth was not as strong as would be expected given the rebound in the housing market, Zandi said.