Employment growth in the private sector of ADP drops to its lowest level in nine years in May

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Bloomberg News / Landov

ADP signs are posted while job seekers are lining up at an employment show in Los Angeles, California.

Numbers: Private sector employers recruited only 27,000 people in May, said Wednesday ADP, a payroll company. This was greatly missed by the 175,000 jobs forecast by economists surveyed by Econoday.

What happened: Small businesses cut 52,000 jobs in May, said ADP. Medium-sized enterprises added 11,000 and large corporations 68,000.

Goods-producing industries cut 43,000 jobs, mainly concentrated in a loss of 36,000 for construction; while the services sector added 71,000.

"The weakening of the economy," said ADP architect Mark Zandi this morning at CNBC. "This number overestimates the case," he added. It is important to note that Zandi used exactly the same words last month to describe an upward surprise.

"Growth is slowing down, and it is slowing down dramatically," added Zandi. "The companies capex is dead in the water."

Big picture: The ADP report can be used as a preliminary reading of the Ministry of Labor's highly monitored employment report released two days later, but its results are flawed. However, in April, ADP came close to closing: 275,000 jobs in the private sector were created and the BLS recorded a gain of 263,000. ADP revised its April reading to a gain of 271,000.

Most economists believe that the frantic pace of job creation in recent years will inevitably begin to slow down soon. The big question now is what impact will the Trump administration's trade wars have? Zandi said on Wednesday that he did not think that the impact of the trade wars is being felt in the employment figures, for the time being.

See also: Leading indicators show economic expansion is about to become the longest in US history

Market reaction: stocks

DJIA, + 0.55%

rallied on Tuesday after Federal Reserve officials hinted that they would be willing to lower interest rates – or keep the increases pending – as long as trade disputes continue. But on Wednesday, 10-year US Treasury yields declined after the ADP report.

Related: How Mexican tariffs could hurt $ 600 billion in cross-border trade – and the US economy

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