Private jobs data and a Federal Reserve report showed glimmers of improvement in the U.S. labor market last month, considered key to propelling the economic recovery, while the U.S. services sector grew at its fastest pace since the recession began.

U.S. private employers eliminated fewer jobs last month, and another report showed planned layoffs by U.S. firms in February fell to the lowest level since 2006.

The news came ahead of the key monthly U.S. nonfarm payrolls report on Friday. Analysts predict that recent U.S. Northeast snow storms have affected Friday's data, but caution against reading too much into it.

The ADP report is used by economists as a clue to what official payrolls numbers from the Labor Department might reveal.

This is a positive sign that we are turning the corner toward job growth, said David Resler, chief economist at Nomura Securities International in New York.

The U.S. economy is slowly bouncing back from its worst downturn since the 1930s, but the job market has remained a top worry, with unemployment near 10 percent.

A Federal Reserve report showed the economy strengthened modestly across most of the Fed's 12 districts during February. The so-called Beige Book summary said snowstorms likely held back activity, but noted the pace of layoffs slowed. For details, see [ID:nN03256503]

If you glean through it, you see some positive signs on employment, which is the most important economic measure at the moment, said Daniel North, chief economist at Euler Hermes ACI, in Owings Mill, Maryland.

Private employers cut 20,000 jobs in February, compared with 60,000 job losses in January, the report by ADP, a payroll processor, showed on Wednesday. The February number was in line with the median estimate.

Separately, the Institute for Supply Management said its services index rose more than expected in February and hit the highest reading since December 2007.

An employment component in the index also rose. The services sector accounts for the majority of U.S. employment.

U.S. stocks rose earlier in the day as the data reassured investors the recovery was on track, but the major indexes pared gains and ended little changed on worries about bank regulation. U.S. Treasuries eased after the data.

Planned layoffs by U.S. companies in February fell to the lowest level since July 2006, according to a report by Challenger, Gray & Christmas Inc., a global outplacement consultancy.

The recent storms had little impact on the ADP report, but the weather could have a sizable effect on Friday's payrolls number, said Joel Prakken, chairman of Macroeconomic Advisers LLC, which jointly developed the ADP report.

The difference comes from the way the data is collected.

People who are on the payroll but did not work during the February survey period due to bad weather show up in the ADP but will not show up in the government's jobs report, Goldman Sachs economists said in a research note.

The Institute for Supply Management services sector data follows another ISM report Monday that showed the U.S. manufacturing sector grew in February, though more slowly than expected.

Data in Europe was somewhat less positive. A survey on the euro zone services sector on Wednesday showed the sector expanded more slowly in February than expected.

Analysts expect Friday's U.S. jobs report, the most closely watched measure of the country's labor market, to show the economy lost 50,000 positions last month, compared with 20,000 the month before, according to Reuters data.

Unemployment is expected to have risen to 9.8 percent from 9.7 percent in January.

High unemployment has held back consumer spending. There was further evidence of spending weakness in Wednesday's earnings reports, with results from U.S. warehouse clubs Costco Wholesale Corp and BJ's Wholesale Club missing analysts' estimates.

(Additional reporting by Leah Schnurr, Steve Johnson, Rodrigo Campos and Richard Leong;)

Unemployment