The US private sector added fewer jobs than expected in May, according to a report from payroll firm ADP Wednesday that came two days ahead of the government's highly anticipated jobs data. ADP reported an increase of 135,000 private jobs in May, a pick-up from the downwardly revised 113,000 jobs in April. The May number was well below the monthly average of net new positions for the first four months of the year, 160,000, and surprised many analysts who had expected a better 157,000 jobs. Mark Zandi, chief economist of Moody's Analytics, which helps produce the report, highlighted that job growth had slowed since the beginning of the year across all industries and all but the largest companies. "The softer job market this spring is largely due to significant fiscal drag from tax increases and government spending cuts," Zandi said. Amid political gridlock over public deficit reduction, payroll tax cuts expired on January 1 and the drastic "sequester" spending cuts to slash $85 billion through September began on March 1. Most of the May gains were in service industries, which added a total of 138,000 jobs, offsetting the loss of 3,000 jobs in the goods-producing sector, ADP said. A gain of 5,000 jobs in construction amid a recovering housing market was wiped out by a loss of 6,000 jobs in manufacturing. The US Department of Labor will release its estimates of May private and public job creation and unemployment on Friday, and analysts say the ADP figures are not always good pointers to what the government data will show. Cooper Howes of Barclays said the ADP numbers are "not necessarily a useful tool for forecasting" the Labor Department data "given the frequent revisions and methodology." Analysts expect the Friday report to show job growth slowed to 159,000 new posts in May from 165,000 in April, and the unemployment rate to stay unchanged at 7.5 percent. "Despite the seasonal weakness expected in May payrolls, we believe the trend in initial jobless (claims) indicates that the labor market is not experiencing a more pronounced slowdown," said Joseph LaVorgna of Deutsche Bank.
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