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Businesses slow job creation, raising specter of summer slowdown

by Jeff Cox /  / Updated 

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 People attend the NYC Uncubed tech recruiting event on May 17, 2013 in New York City. Mario Tama / Getty Images

Private-sector job creation was weaker than expected in May, as the economy struggled to break free of what appears to be a summer slowdown on the horizon.

ADP and Moody's Analytics reported just 135,000 new positions for the month, below expectations of 165,000.

Services were responsible for all the new jobs, adding 138,000, while the goods-producing sector lost 3,000 positions.

Construction added 5,000 workers, but that was offset by a loss of 6,000 manufacturing jobs.

(Read More: Productivity Rises as Labor Costs Fall)

The poor showing sets the stage for a possibly weak nonfarm payrolls report on Friday, when the Labor Department had been expected to show 169,000 new jobs.

Economists sometimes will use the ADP numbers to adjust their estimates for the government account, even though the private-sector count has been a historically unreliable gauge.

"The job market continues to expand, but growth has slowed since the beginning of the year," Moody's economist Mark Zandi said in a statement.

Financial markets offered muted reaction to the report, with stock market futures off their lows. Investors have been using the weak economic reports to fuel hopes that the Federal Reserve will continue with its aggressive easing program.

(Read More: Why Bad News Soon May Just Become...Bad News)

The Fed is creating money to buy $85 billion in Treasurys and mortgage-backed securities each month.

Recently, some members have suggested that the central bank begin easing its purchases, and markets in turn have been unsettled as interest rates have climbed and equities have been volatile.

A weak payrolls number Friday could go a long way toward squelching talk that the Fed will begin tapering purchases as soon as this month.

(Read More: Gross Skewers Bernanke: You're Part of the Problem)

"As far as the tapering debate goes, the report does nothing to bolster expectations that the Fed will ease its foot off the pedal over the summer," Andrew Wilkinson, chief market economist at Miller Tabak, said in a note.


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