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US private sector creates 281,000 new jobs in June, vs. estimate of 200,000

Private sector job creation surged in June, with companies adding a much larger than expected 281,000 new positions, according to a report Wednesday from ADP.

Economists surveyed by Reuters expected the National Employment Report to show 200,000 new jobs as the U.S. economy seeks to regain traction following a brutal winter. That's up from an initially reported 179,000, which was unchanged.

As has been the trend, the service sector and small businesses led the way. Service-providing companies added 230,000 new positions, while goods producers contributed 51,000. Professional and business services was the top industry, with 77,000 jobs, while trade/transportation and utilities added 50,000 and there were 36,000 new construction positions.

The news comes a day ahead of Thursday's nonfarm payrolls report, which is expected to show 215,000 new positions overall counting government jobs. ADP's numbers, which are reported in tandem with Moody's Analytics, could cause economists to ramp up their projections.

Job seekers fill out applications before the start of the HireLive career fair on June 4, 2014 in San Francisco.
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Job seekers fill out applications before the start of the HireLive career fair on June 4, 2014 in San Francisco.

Paul Dales, Senior U.S. economist at Capital Economics, said he's holding to his projection for 200,000 on the payroll count as he considers ADP "no longer a reliable leading indicator of payrolls," though he thinks an uptrend is in the making.

"We have pointed out before how a change in the methodology in late 2012 means that the ADP places less weight on its own survey of payrolls and more on the previous month's change in the official payrolls data," Dales said in a note. "We're more inclined to believe it this time, however, given that the increase in official payrolls slowed in May, which should have depressed June's ADP figure. The pick-up in June must therefore have been generated by ADP's own survey."

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"The gains were broad-based. Every single industry added payrolls," Moody's economist Mark Zandi told CNBC. " Every company size added to payrolls. It was uniformly strong. Looking at the underlying ADP data, it looks really good."

Markets reacted positive to the numbers, with traders pushing stock market futures to slightly positive territory.

Go here for market reaction.

Small businesses—less than 50 employees—created 117,000 new jobs for the month.

This is a breaking news story. Check back here for updates.

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