(CNN) — High economic uncertainy has hiring grinding to a halt at US businesses.
Job growth slowed for the second month in a row at private-sector firms, which added just 37,000 jobs in May, according to new employment estimates released Wednesday by payroll company ADP.
May’s job gains, which marked a sharp stepback from the 60,000 jobs added that ADP reported for April, came in significantly below economists’ expectations for 130,000 jobs to be added.
It’s the lowest monthly total since March 2023, ADP said.
“The weak numbers we’re seeing now does not point to a labor market that’s collapsing, but there is hiring hesitancy,” Nela Richardson, chief economist at ADP, said Wednesday during a call with reporters.
Richardson pegged the loss of hiring momentum to downbeat consumer sentiment and trade policy uncertainty.
The bulk of the hiring slowdown came from the goods sector, which lost 2,000 jobs, according to ADP’s report.
US stock futures, which had been rising, dropped after the data release. Dow futures fell 40 points. S&P 500 futures slid 0.1%, and futures tied to the Nasdaq 100 slid 0.2%. All three major indexes moved into the green shortly after the opening bell.
President Donald Trump’s sweeping policy moves, especially a whipsaw approach to massive import tariffs, have left businesses shellshocked, uncertain of input costs and the extent to which these changing policies could rattle consumers.
“It’s like driving through fog for some of our firms here,” Richardson said. “When you’re in that situation, you can’t really stop, but you might slow down … when it comes to hiring, there’s a hesitancy because of a wide level of uncertainty.”
And it was the smallest of firms that lost the biggest share of jobs, Richardson noted. Firms with under 50 employees shed 13,000 jobs in May.
“As goes small business, so goes the economy,” she said. “This weakness is something that we’re paying close attention to.”
Separate data released Wednesday by the Federal Reserve Bank of New York showed that some small businesses in New York and New Jersey that were exposed to higher tariffs have taken big hits to their bottom lines. As a result, these firms made modest reductions to their employment levels, and are passing most — and in some cases all — of the tariff-related cost increases to their customers, according to the New York Fed.
Weak, but not collapsing
Despite the stark pullback in hiring, pay growth held up, presenting an encouraging sign of stability within the labor market, she said.
Pay growth for those who stayed at their employer and those who switched jobs was 4.5% and 7%, respectively.
Following the ADP release, Trump took to social media Wednesday morning to ramp up pressure on Federal Reserve Chair Jerome Powell to cut interest rates.
“ADP NUMBER OUT!!! “Too Late” Powell must now LOWER THE RATE. He is unbelievable!!! Europe has lowered NINE TIMES!” Trump wrote in a Truth Social post.
The European Central Bank has cut the country’s main interest rate seven times in the past year.
Central bankers and Powell, whom Trump appointed to helm the Fed starting in 2018, have taken a cautious approach to monetary policy in recent months to get a better gauge on how the economic data responds to Trump’s policies. The Fed’s May policy statement noted that the “risks of higher unemployment and higher inflation have risen.”
When asked about Trump’s comments, ADP’s Richardson said it highlights the importance of economic data, especially labor market data in assessing what comes next.
“I’ll leave it to the policymakers to decide how this data point fits into their objectives,” she said. “The labor market isn’t collapsing; wages are robust, but they’re not triggering inflation; hiring is slow, but it’s not leading to outsized layoffs. So, in that sense, there’s nothing in the labor market that points in any direction strongly.”
ADP’s tabulations don’t always correlate with the official federal jobs report, but it’s sometimes looked to as a proxy for overall hiring and wage growth activity.
The official monthly jobs report from the Department of Labor will be released Friday morning. It is expected to show a slowdown from 177,000 jobs added in April to 130,000 in May.