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Job creation nearly ended in May, another sign of slowing US economic momentum.
Businesses created only 27,000 new positions during the month, according to a report released Wednesday by payroll firm ADP and Moody's Analytics, well below the 173,000 estimated by Dow Jones.
Reading was the worst since the beginning of the economic expansion and the fall of the labor market in March 2010 with a loss of 113,000. Since then, the number of private employees has increased by 21.3 million.
"Job growth is moderating," said Mark Zandi, chief economist at Moody's Analytics, in a statement. "Labor shortages hinder the growth of employment, especially in small businesses, and layoffs at traditional retailers are being felt."
Indeed, firms with fewer than 50 employees, who lost 52,000 jobs, and the goods-producing sector, down 43,000, suffered the most. Virtually all of the small business loss (50,000) occurred in businesses with fewer than 20 employees, while the construction sector was the biggest loser in construction, with 36,000 jobs lost .
Large companies resisted the slowdown by creating 68,000 jobs, while those with 50 to 499 employees created 11,000.
Anemic growth in May comes after a sharp increase of 271,000 in April, the highest since July, although revised downward by 4,000 from the initial reading. The creation of private jobs in the ADP / Moody count has averaged 188,000 per month in 2019.
"After a month of April being too strong, May was the smallest gain since the expansion," said Ahu Yildirmaz, vice president and co-director of the ADP Research Institute, in a statement. "Large companies continue to remain strong because they are better equipped to compete in the labor market in a tight labor market."
The disappointing report comes two days before the official government takes a closer look at the non-farm wage reading. Economists surveyed by Dow Jones expect the Department of Labor to announce a growth of 180,000 people, down from 263,000 in April, and the unemployment report to be at its lowest level in 50 years, to 3.6%. The ADP report can sometimes lead economists to revise their expectations regarding non-farm jobs, although the two figures may be very different.
Zandi later told CNBC that the May ADP number "probably overestimated the merits" of a weakening of the economy and believed that the report on non-farm employment was would probably be around 150,000 based on private employment figures for the last two months.
At the sector level, all gains were recorded in the services sector, which added 71,000 jobs. Health care and social assistance increased by 34,000, followed by professional and commercial services (22,000) and recreation and hospitality (16,000). The "other services" category dropped by 9,000, while information lost 3,000 and education decreased by 1,000.
All major asset classes recorded losses, with natural resources and mining down 4,000 and manufacturing 3,000. Franchise jobs also decreased by 4,800.
The news comes at a sensitive time for the economy.
After a strong 2018 year with GDP up 2.9% and an unusually high growth rate of 3.1% in the first quarter, economists now expect a slowdown for at least the next two quarters. The CNBC Rapid Update survey forecasts only 1.7% gains in the second quarter.
Financial markets slowed down considerably after a record start to the year. Despite Tuesday's strong rally, the Dow Jones Industrial Average fell 4.4% last month.
Markets are betting that the Federal Reserve is intervening with at least two and possibly three rate cuts this year. In a speech on Tuesday, Fed Chairman Jerome Powell said the central bank was ready to "do the right thing" to continue the expansion, which, according to the markets, was an encouraging sign for the Bank. A relaxation of monetary policy.
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