US Services, Private Employment Data Shows Early Recovery Signs

Private companies shed another 2.76 million jobs in May and the dominant services industry contracted for the second straight month, but signs of recovery from the coronavirus lockdowns have emerged.

The US economy has been battered by the pandemic as businesses closed to stop the virus's spread, with more than 40 million people losing their jobs at least temporarily, and the unemployment rate surging from near-historic lows to 14.7 percent in April.

The private employment data released by payrolls firm ADP on Wednesday adds to the nearly 20 million jobs lost in April, and indicates the official unemployment rate is set to continue upward on Friday when the latest government jobs report is released.

"The impact of the COVID-19 crisis continues to weigh on businesses of all sizes," Ahu Yildirmaz, co-head of the ADP Research Institute, said in a statement.

"While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses."

The losses were widespread throughout all sectors and sizes of business, though education posted a rare, modest increase in employment, according to the data.

The losses were, however, well below the nine million expected by economists, who have been predicting a rebound in employment thanks to states' moves to reopen and a massive government rescue package that has allowed some companies to retain or rehire workers.

The report "suggests that the re-hiring of people in states beginning to reopen was very substantial," said Ian Shepherdson of Pantheon Macroeconomics.

The dominant US services sector alone lost just under two million jobs in May, while manufacturing lost 719,000, according to the ADP report.

A separate survey from the Institute for Supply Management (ISM) showed the services sector contracting for the second month but at a slower rate than in April, rising to 45.4 percent from 41.8 percent, with a 15-point jump in the production index to 41.0 percent.

Anything below 50 percent indicates activity is slowing, meaning the lockdowns ended nearly 10 years of uninterrupted growth in the services industry, and the survey's employment index for May was a paltry 31.8 percent, just above the month prior.

Until last week, "it looked like we were bottoming out and hopefully were recovering a little bit," ISM survey chair Anthony Nieves told reporters.

But the at-times violent protests unfolding in cities and towns nationwide over the death of George Floyd, the latest in a string of black people to be killed by police, add a dash of uncertainty, he said.

Curfews have been imposed in dozens of cities to quell the unrest at a time when states were just allowing more and more businesses to reopen, while President Donald Trump has threatened to deploy the military.

"It will remain to be seen, with what's going on with the combination of the pandemic and civil unrest and social injustice and everything else that's happening right now" how the services sector fares, Nieves said.

Friday's Department of Labor jobs report is set to raise the worst unemployment rate since the Great Depression 90 years ago even higher.

But while the ADP data isn't infallible, Shepherdson said it indicated that it is probably safe to "assume that Friday's official payroll numbers will be much less bad than the current consensus."

He predicted another decline of eight million jobs, and "June payrolls likely will increase substantially."