According to the joint survey released by the payroll processor and Moody's Analytics on Wednesday, only 27,000 jobs were added last month. The disappointing reading represented the smallest gain in private positions since the start of the current USA economic expansion.
About 100,000 additional jobs a month are needed for the economy to keep up with population growth.
"Job growth is moderating. Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting".
The report, which uses ADP's actual payroll data, found that small businesses - companies with fewer than 50 employees - lost 52,000 jobs in the past month.
By sector, goods-producing companies lost 43,000 private positions in May, with construction firms leading declines. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of US economic activity. In bond markets, the 2-year U.S. Treasury yield fell 9 basis points to below 1.80%, marking the lowest level since December 2017, and the 10-year yield broke below 2.10%.
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Private employers added 27,000 job in May, the fewest since March 2010, according to the ADP National Employment Report released June 5. Consensus economists are expecting that 180,000 new non-farm payrolls and 175,000 private payrolls were added in May.
Emily McCormick is a reporter for Yahoo Finance. The ADP report, which is jointly developed with Moody's Analytics, has a poor record predicting the private payrolls component of the government's employment report. The increase that was observed last month indicated a spike in newly hired workers offering the economy a temporary boost.
Health care and social assistance added 34,000.
All of the major goods producing categories reported losses, with natural resources and mining down 4,000 and manufacturing off by 3,000.
According to the ADP report, employment in the goods-producing sector fell by 43,000 jobs in May, the first drop in almost 2-1/2 years. CNBC's Rapid Update survey forecasts gains of just 1.7% in the second quarter. In a speech Tuesday, Fed Chairman Jerome Powell said the central bank is prepared to "act as appropriate" to keep the expansion going, which markets took as an encouraging sign that policy easing could be on the way.