ADP Payroll Report Is A Little Good News Covering Up A Lot Of Bad News

Payrolls May Be Up, But Not At Small Businesses

Expect the current regime in Washington to crow about the May ADP National Employment Report ahead of the government’s own employment figures due out tomorrow.

The top-level metric certainly sounds good: 128,000 jobs added.

However, the 128,000 figure marks May as the third consecutive month of declining payroll growth.

Across the totality of the US economy, the pace of hiring is getting slower and slower—and that is never a good sign. Even the usually supine corporate media admits this fundamental economic reality.

As looming interest rate hikes fuel uncertainty over the economic recovery, private U.S. employers posted their worst monthly job growth in more than two years on Thursday, according to payroll processor ADP, which notes that prolonged inflation and the resulting central bank policy could be starting to temper growth in the red-hot labor market.

Small Businesses Are Shedding Jobs

An even worse sign is that small businesses (businesses with between 1-49 employees) are shedding jobs for the second straight month, with a 91,000 drop in small business payrolls for May.

The decline was across all business sectors, making small business payrolls a universal bloodbath for May.

The only bright spot in the small business data was that it was “less bad” than April, when the carnage was just as universal but about 29,000 jobs worse.

Franchise Data Better Than Small Business Data, But Still Shows Weakness

Among national franchise businesses, hiring rose, but was not across the board, with food retailers and business services posting payroll declines.

In keeping with the broader business trend, hiring at franchise businesses was markedly slower than in April.

Slower Hiring Points To More Economic Weakness In The Months Ahead

As much as the current regime in Washington wants to crow about apparent job growth, there is no way to avoid the likely reality that slowing job growth today portends economic weakness tomorrow—or, given the parlous state of the world economy—more economic weakness.

Asset Price Deflation: The Bubble Is Bursting

Whatever bright spots exist in the overall economic picture today are soon to be replaced by dark negatives. Unless the pace of hiring picks up again, slower job growth will soon become job reduction, and the economy will be demonstrably shedding the jobs it has just created.

The “good news” of the ADP National Employment Report is little more than a somewhat hopeful statement that major job declines have not “yet” happened—although the trends very much suggest that they are coming.

Economic contraction is coming, if it is not already here.