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updated 6/1/2011 1:14:13 PM ET 2011-06-01T17:14:13

Private-sector payroll growth slowed sharply in May, coming in far below expectations and falling to the lowest level in eight months, a report by a payrolls processor showed on Wednesday.

The ADP Employer Services report showed private employers added a scant 38,000 jobs last month, while April private payrolls were revised down to an increase of 177,000 from the previously reported 179,000. Economists surveyed by Reuters had forecast a gain of 175,000 jobs for May.

Wednesday’s ADP report “suggests that employment growth slowed sharply in May,” said Joel Prakken, Chairman of Macroeconomic Advisers LLC, which jointly developed the report, adding that Friday's U.S. jobs report for May could disappoint on the heels of the ADP data.

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"I'm really expecting Friday's number to disappoint to the downside," Prakken said on a conference call with journalists, referring to the U.S. Labor Department's monthly non-farm payrolls report due out Friday morning.

The ADP figures come ahead of the government's much more comprehensive labor market report on Friday, which includes both public and private sector employment. Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.

Another report issued Wednesday showed the number of planned layoffs at U.S. firms rose modestly in May with the government and non-profit sectors making up a large portion of the cuts.

Employers announced 37,135 planned job cuts last month, up 1.8 percent from 36,490 in April, according to a report from consultants Challenger, Gray & Christmas, Inc.

May's job cuts were down from the same time a year ago, falling 4.3 percent from the 38,810 job cuts announced in May 2010. For 2011 so far, employers have announced 204,374 cuts, down 20.9 percent from the first five months of 2010.

"Despite several signs of weakness in the recovery, the continued slow pace of downsizing outside of the government sector suggests that employers do not see these as long-term problems," John Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement.

"It is unlikely that we will see a sudden resurgence in corporate downsizing in the months ahead unless there is a major shock to the economy," he added.

Cuts in the government and non-profit areas totaled 14,755 and accounted for nearly 40 percent of May's announced layoffs. Even so, the number of cuts was down 11.6 percent from last May.

Hiring plans fell to 10,248 from 59,648 in April, which had been boosted by McDonald's bid to hire 50,000 workers in one day.

The Associated Press and Reuters contributed to this report.

Video: Worrying jobs data


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