Private employers added jobs at a pace that continued to exceed expectations in May, the third month of deepening energy and trade disruptions that have rapidly raised costs across the U.S. economy for businesses and consumers alike.

Of note, private sector job growth broadened beyond the small firms and healthcare sectors that had dominated job growth in previous months, according to payroll processing firm ADP, updating its monthly employment report on Wednesday.

U.S. private employment rose by 122,000 last month, building on April job gains of 105,000, revised lower from initial estimates of 109,000. By comparison, private sector job growth was slightly over 60,000 in both March and February.

Economists polled by Dow Jones had projected 110,000 additions in May, while economists surveyed by Reuters had forecast 117,000.

“Hiring was more broad-based in May than we’ve seen in the last few years,” said Nela Richardson, chief economist at ADP, commenting in the report. She added that the labor market “continues to show sustained momentum” as the summer hiring season nears.

The education and health services sector led the monthly gains, adding 57,000 jobs, followed by the trade, transportation and utilities sector’s 36,000 new positions. Employers across professional and business services fields added 11,000 roles, improving on a relatively strong rate of job openings in that segment in April.

Of the ten so-called “supersectors” that ADP uses to categorize hirings, only two posted declining job growth last month. The natural resources and mining sector shed 3,000 jobs while the information sector dropped 9,000.

The report affirms a growing sense among Federal Reserve policymakers and financial markets that fears of a rapidly weakening labor market — which prompted three successive interest rate cuts at the end of 2025 — has stabilized at lower growth levels in 2026.

Instead, rapidly rising inflation fueled by President Donald Trump’s signature tariff policies and economic disruptions linked to the ongoing war in Iran have increased expectations that the next adjustment in the federal funds rate could be a hike.

The next meeting of the Fed’s rate-setting body is scheduled for June 17, which will be the first of newly appointed Fed Chair Kevin Warsh’s tenure. Market-implied odds that policymakers will leave the fed funds rate at its current range of 3.5% to 3.75% were 96.4% as of Thursday morning, according to futures prices tracked by the CME FedWatch tool.

But market odds that a quarter-point hike may occur by the central bank’s mid-September meeting had risen to slightly over 23% as of early Thursday, rising to a greater than 38% likelihood that the Fed would implement a hike by early December, per the FedWatch tool.

Sustained resilience in the labor market signals deteriorating inflation outlooks will become a driving focus in upcoming monetary policy decision, particularly if broadening job gains noted by ADP this week continue.

Across different sizes of private companies, smaller employers with fewer than 50 employees added a combined 67,000 jobs in May, while employers with between 50 and 500 added 17,000. Large employers with more than 500 employees netted 40,000.