Private sector employers added more jobs than expected last month in a sign of steady improvement in the labor market, ahead of the closely watched non-farm payrolls report from the Labor Department on Friday.
Employers added 217,000 jobs in February, the ADP Employer Services report showed on Wednesday, above expectations for a rise of 175,000. January's figure was revised higher by 2,000 to 189,000.
Economists said the private-sector hiring indicates improvement in the labor market, though they noted the month-to-month changes in ADP's report are not always good predictors of Friday's larger jobs numbers.
The rise in ADP in February, taken with other indicators like claims and (Institute for Supply Management) employment, is consistent, we reckon, with official private payrolls rising by about 250,000, Ian Shepherdson, chief economist at High Frequency Economics wrote in a research note.
Shepherdson said he now expects overall payrolls to rise by 225,000, up from his previous forecast of 200,000.
Economists polled by Reuters forecast Friday's report will show a rise in private sector payrolls of 190,000 and a rise of 185,000 in overall nonfarm payrolls.
Stocks moved up slightly after the start of trading.
Earlier on Wednesday, data showed the number of planned layoffs at U.S. firms rose in February to its highest level in 11 months as government and non-profit employers let workers go.
While the ADP private sector payrolls data and the Labor Dept data for private payrolls generally trend in the same direction over time, in the short term there are often discrepancies.
Gains in the service sector helped fuel the rise in private employment, ADP said, along with improvements in the goods producing and manufacturing sectors.
In our data set, at this point there is just an unambiguous signal that payroll employment has picked up, said Joel Prakken, chairman of Macroeconomic Advisers LLC, which jointly developed the private-sector hiring report with ADP.
Construction employment fell in February, however. Prakken said data in recent months suggests job losses in that sector have bottomed out.
Later on Wednesday, investors will get a snapshot of the health of the U.S. economy when the Federal Reserve's Beige Book of economic conditions is released.
(Editing by Padraic Cassidy)