After Arkansas and the rest of the U.S. saw strong employment growth in April, a closely-watched private industry snapshot released Wednesday (June 5) highlights concerns that the Trump administration’s ongoing trade disputes with Mexico and China and labor shortages could take the legs out of the fast-running jobs market.
According to the ADP National Employment Report, nonfarm private sector job growth fell to its lowest level in nearly a decade as small businesses, retailers and goods-producing sectors lost ground ahead of Friday’s much-anticipated national unemployment report from the U.S. Department of Labor.
The survey, produced monthly by the ADP Research Institute from an anonymous sampling of 411,000 U.S. clients employing nearly 24 million workers in the U.S., also shows private employment only increased by 27,000 jobs between April and May. That falls well short of the ADP’s revised 271,000 private sector positions added in April and the weakest post-recession job tally since early 2010.
“Following an overly strong April, (the month of) May marked the smallest gain since the expansion began,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, which produces the report in collaboration with Moody’s Analytics. “Large companies continue to remain strong as they are better equipped to compete for labor in a tight labor market.”
University of Arkansas at Little Rock economist Michael Pakko said the ADP report “certainly does signal a slow month for job growth in May. If it is borne out in the official BLS (U.S. Bureau of Labor Statistics) report on Friday, it would be the smallest monthly employment increase since September 2017,” he said. Pakko also said the ADP survey follows an unexpectedly large U.S. job spike in April, “so a low number for May would not necessarily indicate anything more than a one-month blip.” However, in a recent research report, Pakko said the state’s job expansion has been moderating, growing only at a rate of 1% over the past 12 months with flat growth in Fort Smith and Pine Bluff.
Unlike the national employment reports that measure changes from the beginning of the current nationwide employment expansion that began in February 2010, Pakko said UALR’s Economic Development Institute uses a slightly modified view of payroll employment that follows cumulative Arkansas job growth under the post-recession expansion phase that began in December 2013.
“Since that time, statewide employment growth has been a cumulative 8.3%. Northwest Arkansas and Jonesboro are the only the two metro areas that have grown faster than the statewide average, but all of the Arkansas metro areas (except Pine Bluff) have experienced employment growth over the subsequent 5-plus years,” said Pakko, director of UA-Little Rock’s economic research group.
Still, Pakko’s research dovetails with BLS data showing tepid nonfarm employment growth of 1.1% in 2018, down from 1.3% in 2017. He said the ADP report showed particular weakness in goods-producing sectors, including the construction and manufacturing sectors, that have seen strong growth in Arkansas in recent months.
“So, it would be disappointing news if that trend carried over into the data for the state,” he said. “On the other hand, there were fairly strong gains in service-producing sectors, which have been providing most of Arkansas’ job growth this decade but have shown notable slowing growth rates this year.”
Ernie Goss, economist and director of Creighton University’s Economic Forecasting Group, noted earlier this week he expects trade tariffs against Mexico announced by the Trump administration last week to have a negative impact on job growth across the nine-state regional economy stretching from Arkansas to Minnesota, if implemented.
“The regional economy continues to expand at a positive pace. However, I expect the latest announced tariffs against Mexico, if implemented, to push more Mid-America states into job loss territory in the months ahead,” said Goss. “Recent flooding and trade issues have pushed regional manufacturing employment back to December 2018 levels. U.S. Bureau of Labor Statistics data show that regional manufacturing employment in April stood at 1,466,000, unchanged from December’s reading.”
The ADP report was released between Creighton University’s Mid-America Business Conditions Index on Monday and Friday’s U.S. unemployment report. Generally, the ADP report provides an early preview of the broader monthly U.S. jobless survey, which Wall Street economists had earlier forecasted to add 180,000 new jobs in May.
“Job growth is moderating. Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting,” said Mark Zandi, chief economist of Moody’s Analytics.