10:46 AM
Hiring surge buoys economy outlook
Addison Ray
By Jonathan Spicer
NEW YORK | Wed Jan 5, 2011 12:43pm EST
NEW YORK (Reuters) - Private sector jobs surged in December at a rate three times stronger than forecast, a hiring report showed, the most bullish signal in months that a recovery in the world's biggest economy is stepping up a gear.
The ADP Employer Services private sector jobs report on Wednesday comes two days ahead of the U.S. government's closely watched payrolls report. Many economists raised their forecasts for a wider reading of jobs growth on Friday.
"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."
In another sign of strength in the U.S. economy, an industry group on Wednesday reported its gauge of the massive U.S. services sector reached its highest level in over four years.
The data sparked a sharp cut in prices of U.S. Treasury debt as investors bet on a stronger recovery.
The U.S. dollar gained more than 1 percent against the yen and the euro. Stocks reversed losses and posted moderate gains on the data.
Private employers added a surprising 297,000 jobs last month, the biggest rise ever and up from a gain of 92,000 in November, the ADP data showed. The ADP data goes back to 2000.
Shortly afterwards, the Institute for Supply Management said its index of national services activity rose to 57.1 in December from 55.0 in November -- better than economists' median forecast of 55.6.
The data was the latest in a series, ranging from trade to retail sales, suggesting the U.S. recovery is gaining speed.
"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.
The government's comprehensive labor market report, which includes both public and private sector employment, is due on Friday. Analysts polled by Reuters expect it to show a rise in overall nonfarm payrolls of 140,000 in December, including a rise in private payrolls of 145,000.
"We now have to expect a much bigger number on Friday, 250,000?" said High Frequency's Shepherdson.
Adding to the rosy 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.
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