U.S. businesses added 173,000 jobs in May, reflecting a healthy but moderating pace of labor market growth, according to a new survey released on Thursday.
Jobs gains were stronger than the 166,000 in April but losses at energy companies and in the manufacturing sector have cut into the stronger expansion, according to the ADP national employment report produced in collaboration with Moody’s Analytics.
Still, Mark Zandi, chief economist of Moody’s Analytics, said that "despite the recent slowdown, job growth remains strong enough to reduce underemployment."
He said that even though the jobs numbers aren't averaging the more than 200,000 clip, the labor market is "very healthy" and still on track to reach full employment within the next few months.
Zandi said that the recently resolved Verizon strike where 35,000 workers dropped off payrolls didn't factor into the ADP figure but it is likely to weigh on last month's government numbers.
Service-sector employment, which makes up about 90 percent of all jobs, rose by 175,000 jobs in May, a slight increase over April’s 173,000.
The government's jobs report, which is due out in Friday, is forecast at around 160,000.
Zandi said that pace isn’t likely to spur the Federal Reserve to increase interest rates until July unless the May figure comes in well ahead of expectations, which would be the 250,000 range.
Last month, construction added 13,000 jobs, while manufacturers shed 3,000 jobs.
Payroll growth picked up at medium and large companies after an April slowdown.
In a separate Labor Department report, jobless claims fell 1,000 to a seasonally adjustd 267,000, marking 65 consecutive weeks of initial claims below 300,000. That is the longest streak since 1973 and is consistent with a healthy labor market.
Employment at companies with 50-499 employees increased by 63,000 jobs, up from last month’s 39,000. Large companies with 500 or more employees added 34,000 jobs, up from April’s 25,000.
Hiring slipped at smaller firms to 76,000 jobs in May, down from 101,000 in April.
Companies with 500-999 employees added 11,000, and companies with more than 1,000 employees added 24,000 this month.
Professional services contributed 43,000 jobs, up from April’s 38,000, while the trade/transportation/utilities arena grew by 28,000, up from 24,000 jobs in April. Financial activities added 13,000.
“Challenging global conditions affecting hiring at large companies and a tightening labor market for skilled workers are among the factors that may be contributing to the slowdown," said Ahu Yildirmaz, VP and head of the ADP Research Institute.
This story was updated at 5:15 p.m.