The number of U.S. private-sector jobs surged in December at a rate three times stronger than forecast, the most bullish signal in months that a recovery in the world's biggest economy is shifting up a gear.
Private employers added 297,000 jobs last month, payrolls processing company ADP Employer Services said on Wednesday. It was the largest gain on ADP records dating to 2000.
The data came two days ahead of the government's more comprehensive employment report for December, the world's most closely watched economic indicator, and led many economists to raise their payrolls forecasts.
The report sparked a sharp cut in U.S. Treasury debt prices, and the U.S. dollar gained 1.5 percent against the yen, on pace for its biggest one-day gain in more than three months as investors bet on a stronger recovery. Stocks and crude oil futures reversed losses and headed higher.
Sometimes numbers come as bolts from the blue; this is one of them, said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Nothing in any other indicators of the state of the labor market last month -- jobless claims, help wanted, surveys -- suggested anything like this was remotely likely.
But some economists cautioned the report may have been skewed by how ADP tracks employment and adjusts the data for seasonal fluctuations. Others said simply it is not a reliable guide to predicting the government's payroll count.
Still, the data was the latest in a series, ranging from trade to retail sales, suggesting the U.S. recovery is gaining speed.
A separate report on Wednesday showed service sector activity also picking up. The Institute for Supply Management's index of national services activity rose to 57.1 in December, the highest level in more than four years, from 55.0 in November. Economists had expected a reading of 55.6.
Yet another number that beats consensus and keeps the positive sentiment on the economy alive with some momentum going into the new year, Sean Incremona, an economist at 4Cast Ltd in New York, said of the service sector data.
MOMENTUM INTO THE NEW YEAR
Nonfarm payrolls are now expected to have increased 175,000 in December, according to a revised Reuters poll, up from the previous pre-ADP 140,000 forecast. The jobless rate is expected to slip to 9.7 percent from November's 9.8 percent, a projection untouched by the ADP data.
Adding to the improving employment picture, the number of planned layoffs at U.S. firms fell last month to the lowest level in 10 years, according to a report by consultants Challenger, Gray & Christmas Inc.
And a survey of chief executives of small companies showed a majority planned to add employees in 2011 for the first time in three years, according to small business group Vistage.
The brighter labor market outlook is a boost for President Barack Obama, whose administration has struggled to create jobs as the economy started to recover from the huge hit it took in the financial crisis.
Obama's failure to significantly lower the unemployment rate was seen as a key reason his Democratic party lost control of the U.S. House of Representatives in November's election. Republicans formally took power in the House on Wednesday.
A number of analysts said that because employees of ADP clients remain on payroll records until year-end, regardless of their employment status, the upbeat reading in the report on Wednesday could be misleading.
While ADP adjusts the data for seasonal fluctuations, the so-called seasonal factors would have anticipated a surge in the number of workers falling off payroll records in December, they said.
With fewer firings this year than in recent years, the 'purge' may have been less than the seasonal factors expected which would have caused a 'surge' in the seasonally adjusted data for December, said Daniel Silver, an economist at JPMorgan in New York.
A subindex in the ISM services sector gauge slipped in December, a finding at odds with the robust ADP reading.
(Additional reporting by Emily Flitter, Ann Saphir and Lucia Mutikani; Editing by Padraic Cassidy and Andrew Hay)