Survey: US business hiring picks up in May to 201,000

Payroll processor ADP said Wednesday businesses added 201,000 jobs last month, up from just 165,000 in the previous month. April's increase was the smallest in a year and a half.

The figures suggest that the economy is recovering after it shrank at a 0.7 percent annual rate in the first quarter. On Friday, the government will issue its official jobs report for May. Economists forecast it will show that employers added 227,000 jobs, and the unemployment rate remained 5.4 percent.

The ADP survey covers only private businesses, however, and frequently diverges from the official figures.

Construction companies added 27,000 jobs, ADP said, while manufacturers cut 5,000 jobs. The drop in factory jobs likely reflects the impact of the stronger dollar, which makes U.S. goods more expensive overseas and cuts into export sales.

Other recent reports have painted a mixed picture of the economy. Consumers remain cautious and are reluctant to spend their savings from lower gas prices, which are about $1 a gallon cheaper than a year ago. On Monday, the government said consumer spending was unchanged in April. Instead, the savings rate rose to 5.6 percent from 5.2 percent.

Yet Americans were willing to spend more on cars last month. Auto sales rose 2 percent in May to 1.64 million cars and trucks, according to Autodata Corp. That was the fastest sales pace since July 2005.

And a survey of manufacturing firms showed that factory activity grew at a faster pace in May than the previous month, driven higher by more new orders and greater hiring.

Overall, analysts expect the economy will expand at about a 2 percent annual pace in the second quarter. That would leave growth in the first half of the year barely above 0.5 percent, down from a 3.6 percent in the second half of last year.