Private-sector employment increased by 40,000 in May, led by gains in the small-business sector, according to the ADP National Employment Report released this week.

Small-business employment increased by 61,000 new jobs, while midsize and large businesses shed a combined 21,000, the New Jersey-based business solutions firm reported.

Employment gains in the service sector, which added 77,000 jobs last month, continued to be offset by widespread losses in manufacturing.

The boost in small-business employment "is consistent with the stronger growth and resiliency these businesses have demonstrated over the past several years," Joel Prakken, chairman of Macroeconomic Advisers LLC, which produces the report in partnership with ADP, said in a statement.

Despite beating forecasts of an outright decline in jobs last month, the labor market remains weak, Prakken said.