Job losses were particularly large in large companies, which reported a decline of more than 1.6 million. The manufacturing sector was one of the most successful, losing 719,000 workers.
The total reported was well below the estimate of 8.75 million economists surveyed by Dow Jones, and may be another sign that the worst coronavirus layoffs are over.
The May loss is “obviously a terrible number, but not as catastrophic as expected,” said Mark Zandi, chief economist at Moody’s Analytics, who compiles the report with ADP.
Zandi said the number of ADPs is supported by a sharp drop in the number of persistent unemployment claims, or by people who have been receiving unemployment benefits for at least two weeks. For the last reference week, this total dropped from 3.86 million to 21.052 million.
The number hit an all-time high of 24.9 million for the week ended May 9, the week before the May 12 survey used by the ADP and the government in its survey of non-farm wages. As a result, Zandi said Friday’s official Labor Department tally will show a payroll drop closer to 3 million than the 8.3 million Wall Street expects.
The May count also marked a precipitous fall from the 19.6 million drop in April, an estimate that has been revised from the 20.2 million originally announced. The April loss was by far the worst in the history of the ADP investigation.
“The impact of the Covid-19 crisis continues to weigh on businesses of all sizes,” said Ahu Yildirmaz, co-director of the ADP Research Institute. “While the job market is still reeling from the effects of the pandemic, job losses likely peaked in April, as many states began a gradual reopening of businesses. “
No other information was available on why the reported monthly change was so large or how it could have been so far from Wall Street estimates. Ian Shepherdson, chief economist at Pantheon Macroeconomics, warned investors in a note Tuesday that they should be “prepared for surprises, back and forth” because of the model ADP uses to calculate payroll.
The report is done in conjunction with Moody’s Analytics and is a precursor to the Department of Labor’s two-day monthly report on non-farm wages. Economists expect Friday’s figure, which includes government officials, to drop 8.33 million, bringing the unemployment rate to 19.5% from 14.7% in April.
Service industries, which account for a larger proportion of the job market, lost 1.967 million jobs, compared with 794,000 among producers of goods, according to ADP.
At the sector level, trade, transport and public services led with 826,000 and professional and business services fell by 250,000. Financial activities fell by 196,000 and education and health services declined lost 168,000. The “other activities” category registered a decrease of 307,000. The leisure and hotel sector hard hit fell by 105,000.
Only two areas registered gains: education, with 166,000, and administrative and support services, at 40,000.
In goods production, the drop in manufacturing was accompanied by a decrease of 52,000 in mineral and natural resources and a loss of 22,000 in construction.
In terms of size, medium-sized businesses with between 50 and 499 employees lost 722,000 and small businesses fell by 435,000.