The pace of job creation by private employers picked up in February, reinforcing hopes that Friday's broader payrolls report would confirm the labor market recovery has moved into a higher gear.
The private sector added 216,000 jobs last month, the ADP National Employment Report showed on Wednesday, topping economists' expectations for a gain of 208,000.
The ADP figures come ahead of the government's more comprehensive labor market report on Friday, which includes both public and private sector employment.
"This does suggest we are moving in the right direction," said Beth Ann Bovino, senior U.S. economist at Standard & Poor's Ratings Services in New York.
"It supports the expectations of another 200,000-plus in Friday's payroll report. The jobs numbers are looking healthier."
Economists polled by Reuters are expecting Friday's report to show a gain of 210,000 in nonfarm payrolls, with the private sector adding 225,000 jobs and government payrolls declining modestly. <
Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.
"Historically, the first prints of the ADP report have not been very reliable indicators of the first prints of the BLS (government) data and the average magnitude of the difference between these figures has been about 60,000 over the past 12 months," Daniel Silver, an economist at JPMorgan, wrote in a note.
"That said, the February ADP data have come pretty close to the BLS data during the past few years, missing by only 2,000 in 2010 and 5,000 in 2011."
ADP's January figures were revised up to an increase of 173,000 from 170,000. The report is jointly developed with Macroeconomic Advisers LLC.
U.S. Treasuries prices eased on the data, while stocks opened slightly higher a day after Wall Street suffered its worst selloff in three months.
WAGES REVISED HIGHER
Another report on Wednesday also spelled better news for U.S. workers. Wages rose much faster than first reported in the fourth-quarter, according to Labor Department data.
Unit labor costs rose at an annual rate of 2.8 percent, revised up from the 1.2 percent pace the government reported last month. Economists had expected unit labor costs, which are closely watched by the Federal Reserve for signs of inflation, would be unrevised.
Separate reports on the housing market suggested the sector is continuing to scrape along the bottom. Along with the labor market, housing remains one of the biggest obstacles to a self-sustaining economic recovery.
Home prices fell 1.0 percent in January, the sixth month of declines in a row as the market continued to be hampered by cheaper distressed sales, data analysis firm CoreLogic said.
Compared to January of last year, prices were down 3.1 percent. But excluding distressed sales, prices rose 0.7 percent in January and were off just 0.9 percent on a yearly basis.
Applications for U.S. mortgages to buy homes rose last week though demand for refinancing sagged, the Mortgage Bankers Association said.
(Reporting by Leah Schnurr, Additional reporting by Richard Leong in New York and Lucia Mutikani in Washington)