U.S. private employers added 189,000 jobs in November, a report by a private employment service said on Wednesday, much higher than market expectations and the biggest monthly increase in a year.
Wall Street economists had expected private sector jobs of 50,000 last month. In October, new private sector jobs were revised to 119,000 from 106,000.
The ADP report suggests Friday's closely watched payrolls report from the government, which includes public and private sector hiring, could be much stronger than expected. (To see the full report, click here.)
Assuming government payrolls expand by 19,000, which is the average monthly increase over the last 12 months, Macroeconomic Advisers said this implies an estimated 208,000 increase in total non-farm payroll employment.
According to the latest Reuters poll of economists, the U.S. Labor Department on Friday is expected to show 75,000 non-farm jobs were created in November, down from 166,000 the previous month.
"While the market typically discounts the ADP report, a number this far out of the cloud could cause economists to revise their expectations for Friday," said Brian Dolan, chief currency strategist, at Forex.com in Bedminster, New Jersey.
"We will also now have to keep an eye on the Fed funds futures markets go see if they price in a reduced expectations of a rate cut next week," he added.
The January fed funds future was still fully pricing in a 25 basis point cut at the Dec. 11 meeting but indicated only a 38 percent probability of the central bank easing its benchmark federal funds rate by 50 basis points.
Just before the data the market was factoring in a 54 percent chance of a 50 basis point cut.
The dollar edged higher while U.S. Treasuries fell after the ADP report.
The report was issued by ADP Employer Services and jointly developed with Macroeconomic Advisers.
Challenger Says Layoffs Surged 15.9%
Earlier, a separate report from outplacement firm Challenger Gray & Christmas showed a 15.9% jump in U.S. companies announcing layoffs as the economy grappled with a worsening housing slump and credit crisis.
Curiously, housing-related layoffs actually fell, with the auto and energy industries leading the jump in planned job cuts to 73,140 in November from 63,114 in October.
The financial sector was also hard hit, not surprising given adverse market conditions that have all but paralyzed many sectors of the investment world.
"We probably have not seen the last of financial job cuts tied to the housing slump and the subsequent collapse in credit markets," said Chief Executive Officer John Challenger.
Economists have had a hard time explaining how employment in the housing sector has failed to drop as dramatically as home sales themselves. Some note that undocumented immigrants are often employed in this area, and their absence from the statistics may understate the damage.
Over the longer haul, the Challenger report suggested layoffs were on a downward path, although analysts note that this is due in part to the caution exercised by firms while hiring during the latest expansion.
At the current pace, planned layoffs were on track to post a fifth straight year of decline. They were down 4.7 percent last month compared with November 2006.