Private sector job creation slowed to a near-standstill in May, hitting its lowest level in more than two years as signs emerged of a weakening labor market, payrolls processing firm ADP reported Wednesday.

Payrolls increased just 37,000 for the month, below the downwardly revised 60,000 in April and the Dow Jones forecast for 110,000. It was the lowest monthly job total from the ADP count since March 2023.

The report comes two days before the more closely watched nonfarm payrolls count from the Bureau of Labor Statistics, which is expected to show a gain of 125,000 and the unemployment rate steady at 4.2%.

While the two reports often differ, occasionally by large margins, the ADP count provides another snapshot of the jobs picture at a time when questions are being raised over broader economic conditions.

“After a strong start to the year, hiring is losing momentum,” said Nela Richardson, chief economist for ADP.

Goods-producing industries lost a net 2,000 positions for the month, with natural resources and mining off 5,000 and manufacturing down 3,000, offset by a gain of 6,000 in construction.

On the services side, leisure and hospitality (38,000) and financial activities (20,000) provided some signs of strength. However, declines of 17,000 in professional and business services, 13,000 in education and health services and 4,000 in trade, transportation and utilities weighed on the total.

Companies employing fewer than 50 workers saw a loss of 13,000 while those with 500 or more employees reported a drop of 3,000. Mid-size firms gained 49,000.

Regarding wages, annual pay grew at a 4.5% rate for those remaining in their positions and 7% for job changers, both little changed from April and still “robust” levels, Richardson said.

Economic data has provided a mixed bag of late for the labor market. The BLS reported Tuesday that job openings rose more than expected in April, though other indicators, such as surveys from employment site Indeed and the National Federation of Independent Business, show weaker levels of openings and hiring intentions.

“The market remains distressingly gridlocked, with limited hiring and low quits, and the market can’t keep steadily cooling off forever before it just turns cold,” Indeed economist Allison Shrivastava said after Tuesday’s job openings report.

Federal Reserve officials have been generally optimistic about economic conditions, though in recent days they have expressed concern about the potential impact from President Donald Trump’s tariffs on both inflation and employment.

“I see the U.S. economy as still being in a solid position, but heightened uncertainty poses risks to both price stability and unemployment,” Fed Governor Lisa Cook said Tuesday.

Fed officials are expected to stay on hold regarding interest rates when they meet in two weeks.

Employers increased job openings more than expected in April while hiring and layoffs also both rose, according to a report Tuesday that showed a relatively steady labor market.

The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey showed available jobs totaled nearly 7.4 million, an increase of 191,000 from March and higher than the 7.1 million consensus forecast by economists surveyed by FactSet. On an annual basis, the level was off 228,000, or about 3%.

The ratio of available jobs to unemployed workers was down close to 1.03 to 1 for the month, close to the March level.

Hiring also increased for the month, rising by 169,000 to 5.6 million, while layoffs fell by 196,000 to 1.79 million.

Quits, an indicator of worker confidence in their ability to find another job, edged lower, falling by 150,000 to 3.2 million.

“The labor market is returning to more normal levels despite the uncertainty within the macro outlook,” wrote Jeffrey Roach, chief economist at LPL Research. “Underlying patterns in hirings and firings suggest the labor market is holding steady.”

In other economic news Tuesday, the Commerce Department reported that new orders for manufactured goods fell more than expected in April. Orders fell 3.7% on the month, more than the 3.3% Dow Jones forecast and indicative of declining demand after swelling 3.4% in March as businesses sought to get ahead of President Donald Trump’s tariffs.

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Euro zone inflation fell below the European Central Bank’s 2% target in May, hitting a cooler-than-expected 1.9% as the services print eased sharply, flash data from statistics agency Eurostat showed Tuesday.

Economists polled by Reuters had expected the May reading to come in at 2%, compared to the previous month’s 2.2% figure.

The closely watched services inflation print cooled sharply, amounting to 3.2% last month, compared to the previous 4% reading. So-called core inflation, which excludes energy, food, tobacco and alcohol prices, also eased, falling from 2.7% in April to 2.3% in May.

“May’s steep decline in services inflation, to its lowest level in more than three years, confirms that the previous month’s jump was just an Easter-related blip and that the downward trend in services inflation remains on track,” Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics said in a note.

Inflation has been moving back towards the 2% mark throughout 2025 amid uncertainty for the euro zone economy.

The latest figures will be considered by the European Central Bank as it prepares to make its next interest rate decision later this week. Markets were last pricing in an around 95% chance of interest rates being cut by a further 25-basis-points on Thursday.

Back in April, the central bank took its key rate, the deposit facility rate, to 2.25% — nearly half of the high of 4% notched in the middle of 2023.

But the global economic outlook remains muddied. U.S. President Donald Trump’s protectionist tariff plans have been casting shadows over the global economic outlook, with his so-called “reciprocal” duties — which are also set to affect the European Union — widely seen as harmful to economic growth. Their immediate potential impact on inflation is less clear, with central bank policymakers and analysts noting that it could depend on any potential countermeasures.

Despite the transatlantic tumult, the Organisation for Economic Co-operation and Development in its latest Economic Outlook report out on Tuesday said it was expecting the euro area to expand by 1% in 2025, unchanged from its previous forecast. Euro area inflation is meanwhile projected to come in at 2.2% this year, also in line with the March report.

Euro country bond yields were last lower after the fresh inflation data, with the German 10-year bond yield falling by over two basis points to 2.499%, while the yield on the French 10-year bond was last down by more than one basis point to 3.169%.

The euro was meanwhile last around 0.3% lower against the dollar.