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Workers build new homes on a hill top in Carlsbad, California May 27, 2011. (MIKE BLAKE/REUTERS)
Workers build new homes on a hill top in Carlsbad, California May 27, 2011. (MIKE BLAKE/REUTERS)

U.S. private-sector hiring drops sharply Add to ...

U.S. employment growth slowed sharply in May as businesses created only 38,000 new jobs, according to the latest in a string of weak economic reports suggesting the recovery is stuttering.

Private-sector job creation fell steeply last month from the revised 177,000 positions added in April, according to ADP, the payroll processor. It was the lowest since September and missed economists' expectations of a rise of 175,000.

The report said a "deceleration in employment, while disappointing, is not entirely surprising" given the slowdown in first-quarter economic growth. The government's 1.8-per-cent growth estimate "normally would be associated with very weak growth of employment," ADP said.

The service sector added 48,000 jobs, less than half April's 141,000. Employment in the goods producing sector fell for the first time in seven months, shedding 10,000 jobs, with manufacturers eliminating 9,000 positions.

David Semmens, U.S. economist at Standard Chartered, said: "It is concerning that the goods producing sector which had been a bright light in the US recovery cuts employment".

Small and medium-sized businesses added employees at the slowest pace since September, while large companies employing more than 500 workers cut 19,000 jobs, the most since January 2010.

Mr. Semmens said: "However you try and spin this report it is an ugly report, which will pose severe downside risks to people's payroll estimates".

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