MCO Moodys Corp

By Lisa Beilfuss 

Private-sector hiring rose in May, the latest sign that the U.S. job market remains solid.

Private payrolls across the U.S. rose by 173,000 last month, said payroll processor Automatic Data Processing Inc. and forecasting firm Moody's Analytics. Economists surveyed by The Wall Street Journal expected an increase of 170,000.

The April increase, meanwhile, was revised up to 166,000 from an initially-reported 156,000.

While job creation has moderated in recent months, as energy companies and manufacturers shed jobs and as the market tightens for skilled labor, "job growth remains strong enough to reduce underemployment," said Mark Zandi, chief economist of Moody's Analytics.

Service-sector firms continued to propel job growth in May, upping hiring slightly from April to add 175,000 workers. The increase offset a small decline in head counts at goods-producing firms, dragged by another decline in manufacturing hiring. The service sector comprises most American jobs.

Small firms continued to hire at a better clip than bigger businesses more affected to the global economic slowdown and currency headwinds. America's smallest companies added 76,000 workers last month, down from an upwardly revised 101,000 in April but outpacing the 63,000 hired by medium firms and 34,000 added by large businesses.

The ADP report precedes the Bureau of Labor Statistics's May employment-situation report, due out Friday morning and the last one before the Federal Reserve's June 15 rate decision. ADP lags behind the government's initial private payroll estimate by a month, and it doesn't aim to replicate the nonfarm payrolls survey.

In its report released yesterday on regional economic conditions, known as the beige book, the Fed said "tight labor markets were widely noted in most districts." Recent data including the jobless benefit claims and monthly layoff plans have continued to illustrate a solid labor market, and Fed Chairwoman Janet Yellen has said a rate increase would be appropriate "probably in the coming months" if the economy and labor market continue to strengthen.

Economists polled by The Wall Street Journal expect the BLS to report an increase of 158,000 nonfarm payrolls, little changed from April. The unemployment rate is expected to hold steady at 5%.

Many economists expect that the seven-week strike at Verizon Communications Inc. hurt May payrolls. The strike affected some 36,000 workers who returned to work Wednesday. According to a representative, Verizon doesn't use ADP as a payroll processor. ADP didn't indicate that the strike affected its May tally.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

June 02, 2016 09:06 ET (13:06 GMT)

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