ADP: Employment up 278,000 jobs in May; annual pay up 6.5% yet continues to slow

May saw the nation’s employment level rise, according to the monthly ADP National Employment Report released Thursday, as the private sector added 278,000 jobs. Job growth is strong, while pay growth continues to slow. But gains in private employment were fragmented last month, with leisure and hospitality, natural resources and construction taking the lead. Manufacturing and finance lost jobs.

The ADP report also showed annual pay was up 6.5% year-over-year.

“This is the second month we’ve seen a full percentage point decline in pay growth for job changers,” Nela Richardson, chief economist, ADP, said. “Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.”

Looking at where the jobs were added, the service-providing sector added 168,000 jobs, with leisure and hospitality adding 208,000 positions.

In terms of company size, hiring was strong across the small and medium-sized establishments — adding 235,000 and 140,000 spots, respectively. Large establishments lost 106,000 jobs.

Last month brought a broad-based slowdown in pay increases. Job changers saw a gain of 12.1%, down a full percentage point from April. For job stayers, the increase was 6.5% in May, down from 6.7%.