Fewer jobs were lost than expected in the private sector last month, although the figures are still very high by historical standards. 2.76 million workers were laid off from the private sector in May according to the latest ADP National Employment Report which released on Wednesday morning. The 2.76 million drop pales in comparison to the 9 million losses expected and the 19.55 million jobs lost in April, indicating that job losses resulting from the coronavirus outbreak have likely peaked.
- 2.76 million jobs were lost in the private sector in May vs. 9 million losses expected and 19.55 million lost the month before.
- Economists believe that one quarter of the workers laid off or furloughed in mid-March are unlikely to be rehired, spelling long-term hardship for many Americans.
- Estimates for the non-farm payrolls report indicate that 8 million jobs were probably lost overall last month, with unemployment on a trajectory for 20%.
Millions of Americans lost their jobs in the private sector last month. While the losses were far lower than expected, many workers will not be rehired when coronavirus lockdown procedures are lifted. The labor market that was thriving as recently as February has collapsed, and will remain in poor shape for years to come.
Many businesses are expected to file for bankruptcy in the coming months despite the Paycheck Protection Program launched alongside the $3 trillion stimulus package from the government, which will leave many Americans looking for work in a tough market.
The ADP employment report comes days ahead of the broader employment report due for release on Friday. The rate of unemployment is expected to come in at around 20% after hitting 14.7% in April. It’s expected that the nonfarm payrolls report will reveal approximately 8 million jobs lost in May following the record-breaking 20.53 million lost the month before.
Small businesses of 49 employees or fewer lost 435,000 jobs, medium-sized businesses with between 50 – 499 employees lost 722,000 jobs, and large businesses with a workforce above 500 lost 1.6 million. Goods producing companies lost 749,000 jobs while service-providing companies bore the brunt of the losses at 1.96 million job cuts.
Manufacturing employment fell by another 719,000 in May, extending the decline of 1,330,000 seen in April, according to ADP. This suggests that 2,049,000 workers have been lost in the manufacturing sector in the past two months, with employment dropping to 10,730,000 in May. pic.twitter.com/s7YB1appUO
— Chad Moutray (@chadmoutray) June 3, 2020
Within the goods-producing segment, 52,000 jobs were lost in the natural resources and mining industry. 719,000 were lost in the struggling manufacturing industry, and 22,000 were cut in construction. Meanwhile, among service-producing companies, the heaviest losses came in the trade, transportation and utilities industries with 826,000 losses.
Professional and business services lost 250,000 jobs. Financial activities saw losses of 196,000 jobs, education and healthcare lost 168,000, information lost 115,000, and leisure and hospitality lost 105,000. Other services saw losses of 307,000 jobs.
Ahu Yildirmaz, co-head of the ADP Research Institute, pointed out that the economy is beginning to reopen following weeks of lockdown, adding that the worst of the job losses is behind us.
“The impact of the COVID-19 crisis continues to weigh on businesses of all sizes. While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses.”
Gold prices have seen strong downward momentum following the big miss on private sector job losses. Spot gold last traded at $1,708.50/oz, down -1.22% with a high of $1,731.43/oz and a low of $1,703.26/oz. Gold is likely facing selling pressure on the hope that the Friday government employment report will also come in below expectations, painting a healthier picture of the US labor market than current perceptions.
Senior CIBC economist Andrew Grantham warned that the ADP employment report is often an inaccurate indicator of the broader government employment report, and cautioned against excess optimism regarding the government report due on Friday.
"There are methodology differences between the ADP and payrolls survey which mean Friday's figures may not wholly mirror those released today. Today's print places some upside risk not just on the consensus forecast for non-farm payrolls on Friday (currently -8m) but also our less pessimistic -6m forecast."