Small Businesses Led Job Growth in May

The much-watched ADP jobs report shows small businesses at the head of the employment curve.
Business Writers
May 31, 2012

Small businesses led May job growth, according to a key employment report released Thursday.

Companies with fewer than 500 employees accounted for a whopping 93 percent of the 133,000 new private sector jobs created in May, according to the widely watched Automatic Data Processing Inc. National Employment Report. (The company claims it pays one in six private sector employees.)

The government’s official jobs report—from the Bureau of Labor Statistics—will be released on Friday, covering both private and public sectors; the ADP report often is viewed as a bellwether.

According to the ADP report, firms with fewer than 50 employees were the biggest producer of private-sector jobs: 67,000. Companies with 50 to 499 employees added 57,000 jobs, while companies with more than 500 employees added 9,000.

The increase is the 28th consecutive monthly advance, but "it nonetheless reflected a notable slowdown in the recent pace of hiring," says Joel Prakken, the chairman of Macroeconomic Advisers, which prepares the report based on payrolls of ADP clients. "The sharpness of the deceleration seems consistent with other incoming data suggesting the economy, weighed down by heightened uncertainty over the European financial crisis and by growing concerns about domestic fiscal policy, slowed early in the year."

Prakken added that, "Based on the typical post-World War II recovery, we would expect to see three times the number [of jobs] we see today." Nearly all of the jobs added across the board were by service providers—not goods producers. Of the 67,000 small-business jobs created, 63,000 were in the service-providing sector.

Prakken says that the "pop" in jobs producing goods is basically over. Not only that, but the service economy is barely adding enough jobs to keep unemployment from rising. Manufacturing employment fell by 2,000 in May, the second consecutive monthly decline. Construction employment dipped 1,000, the second consecutive decline following six monthly advances, likely driven in part by unusually warm weather during the winter.

The estimated jobs gain from March to April was revised down modestly, from the initial estimate of 119,000 to 113,000, ADP Employer Services reported.

Another gloomy sign: The Labor Department's weekly count of people filing for unemployment benefits for the first time also rose—up 10,000 to 383,000. The previous week's results also were revised slightly upward.

Do job creation and unemployment figures/predictions affect your decisions, and if so, how?

Photo credit: iStockphoto/Thinkstock

Business Writers