Private-sector jobs increase by 135,000 in May

Even though the figure is better than April's, Zandi called the gain "weak" and said it feels like the economy is throttling back from the underlying average growth of 175,000 jobs a month to 150,000 because of the combination of tax and spending policies. 

May's job gains were below the average monthly increases of 156,000 during the first three months of the year.  

Jobs growth needs to head near the 200,000 range, though, to reflect an economy that is firing on all cylinders. 

Still, he couldn't point anything specific in the data that reflects a reaction to tax hikes that went into effect in January or the broad range of spending cuts, including the $80 billion sequester. 

Manufacturers shed 6,000 jobs last month as the sector showed a contraction of activity in May, which is possibly because of the defense cuts but Zandi said there is "no smoking data gun that reflects sequester or tax hikes."  

Yet, the economy and consumers continue to battle through the sluggishness. 

The economy will need to absorb a hefty cut of 1.5 percentage points to growth because of the fiscal policies, the largest amount since World War II, but it is "amazing how well the economy is holding up considering how powerful the headwinds are," he said. 

Federal Reserve Chairman Ben Bernanke recently warned lawmakers that the central bank's stimulus is not strong enough to stave off the potentially significant slowdown this year and that Congress should reconsider its approach to deficit cutting. 

Small-business hiring hit 58,000, surpassing gains in medium- and larger-sized firms. Another positive is the jobs growth at companies with more than 1,000 employees, which Zandi called "strong" and showing "no sign of weakening."

The Labor Department will release its jobs report on Friday, a measure of public and private employment. April posted 165,000 gains with a drop of the unemployment rate to 7.5 percent.

The ADP figures have been softer than the government's — April’s job gains were revised downward to 113,000 from 119,000 — and Zandi figures they will either eventually be revised down or the sectors weighing on the private data are being slowed the anticipation of the healthcare law. 

Still, he said there is no data point reflecting that theory, at least for now. 

Among the service industries, professional-business services added 42,000 jobs, more than twice as many as in April. The trade-transportation-utilities category recorded a gain of 31,000 jobs, while financial activities added 7,000 jobs.

Construction payrolls continued to improve, rising by 5,000 in May, on top of an increase of 8,000 jobs in April. But Zandi said, based on the pick up in housing starts and permits, that hiring should be stronger in the sector.  

This post was updated at 9:15 a.m.