US private-sector hiring strengthened in May, offering fresh evidence that the labor market remains resilient despite rising inflation and uncertainty stemming from geopolitical tensions in the Middle East.
According to data released Wednesday by payroll processor ADP, private employers added 122,000 jobs last month, exceeding economists’ expectations of 110,000 and marking the strongest pace of hiring since January 2025.
The figure also improved from April’s revised gain of 105,000 jobs.
The latest report suggests that businesses continue to add workers at a healthy pace even as higher energy costs linked to the conflict involving Iran weigh on the broader economic outlook.
Hiring broadens across sectors
Unlike previous months, when job growth was concentrated in a handful of industries, May’s gains were spread more widely across the economy.
Eight of the 10 sectors tracked by ADP recorded job growth, with education and health services leading the way by adding 57,000 positions. Trade, transportation and utilities followed with 36,000 new jobs, while construction added 8,000 and financial activities contributed another 7,000 positions.
“Hiring was more broad-based in May than we’ve seen in the last few years,” ADP Chief Economist Nela Richardson said. “The labor market continues to show sustained momentum going into the summer hiring season.”
The broader distribution of hiring gains may reassure policymakers and investors who have been looking for signs that labor demand is not dependent on a small number of sectors.
Small businesses lead hiring
Job creation was also spread across businesses of different sizes, though smaller firms accounted for the largest share of new positions.
Companies employing fewer than 50 workers added 67,000 jobs during the month, while large businesses with 500 or more employees created 40,000 positions.
Medium-sized firms contributed 17,000 jobs.
Among the smallest employers, firms with between one and 19 workers added 49,000 jobs.
The strong showing is notable because smaller businesses tend to be more vulnerable to elevated borrowing costs and economic uncertainty.
Their continued willingness to hire suggests that labor demand remains firm despite concerns about inflation and the impact of higher energy prices.
Wage growth remains steady
The report also showed little change in wage trends.
Workers who remained in their jobs saw annual pay growth of 4.4%, unchanged from April.
Meanwhile, employees who switched jobs received pay increases of 6.5%, slightly lower than the previous month.
While wage growth has moderated from the peaks seen during the post-pandemic labour shortage, it remains elevated enough to support consumer spending.
Focus shifts to official jobs report
The ADP figures arrive ahead of Friday’s closely watched employment report from the Labor Department.
Economists currently expect the government data to show that the US economy added around 80,000 jobs in May, while the unemployment rate remained steady at 4.3%.
The labor market has recovered from a softer patch last year, when hiring slowed amid uncertainty linked to tariffs and broader economic concerns.
More recently, rising commodity prices following tensions in the Middle East have reignited inflation worries, though layoffs have remained historically low.
Financial markets continue to expect the Federal Reserve to keep interest rates unchanged for the foreseeable future as policymakers assess whether inflation pressures linked to higher energy prices prove temporary or more persistent.
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