Private businesses created 201,000 jobs in August, well above expectations, according to a closely watched report from ADP and Macroeconomic Advisors, a number that sets the stage for Friday's pivotal nonfarm employment report.
The level of weekly jobless claims also dropped, falling 12,000 to 365,000 last week, though the previous week's number was revised higher from 374,000 to 377,000.
The service sector continued to lead job creation, with 185,000 new jobs, with small businesses leading the way in creating 99,000 new positions.
ADP's tally comes a day before the Labor Department releases its monthly report of nonfarm job creation, a number that, unlike the ADP report, includes government positions.
Economists could ratchet up current expectations of 125,000 new jobs and an unchanged unemployment rate (learn more) of 8.3 percent, though the jobs picture remains cloudy.
"We still have a long ways to go, and given our macro forecast for the rest of the year into next year I'm not expecting a further acceleration in the monthly employment gains," Joel Prakken, chairman of Macroeconomic Advisors, told CNBC.
Prakken said the ADP number could suggest a "slight decline" in the jobless rate.
Wall Street had been expecting ADP to show about 145,000 new jobs.
July's figure from the ADP National Employment Report was revised up to 173,000 from the previously reported 163,000.
Stock market futures indicated a positive open on Wall Street and moved a bit higher following the jobs data release as well as a news conference from European Central Bank President Mario Draghi.
While small businesses continued to set the pace, medium-sized firms, with payrolls between 50 and 499 workers, created 16,000, while big business was responsible for just 16,000.
The goods-producing sector generated 16,000 jobs while manufacturing added 3,000.
In related jobs news, the number of Americans filing new claims for jobless benefits fell last week to its lowest level in a month, an upbeat signal for a labor market that has struggled to create enough jobs.
Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 365,000, the Labor Department said.
It was the first drop in new claims since the week that ended Aug. 4 and the lowest level since then as well.
Economists polled by Reuters had forecast claims dipping to 370,000 last week. The prior week's figure was revised up to show 3,000 more applications than previously reported.
However, the four-week moving average for new claims, a better measure of labor market trends, edged up to 371,250.
A Labor Department official said there was nothing unusual in the data and no sign Hurricane Isaac affected the level of claims. The storm hit the U.S. Gulf Coast last week, disrupting business at the region's ports, airports and oil refineries.
The report has no direct bearing on Friday's monthly employment report for August.
The state of the labor market, particularly the unemployment rate, could determine whether the Federal Reservewill offer additional monetary stimulus to the economy at its Sept. 12-13 policy meeting.
The unemployment rate has been stuck above 8 percent for more than three years.
Although housing and retail sales data suggest that economic activity picked up early in the third quarter, business spending is weakening and inflation is slowing.
In the week ended Aug. 25, the number of people still receiving benefits under regular state programs after an initial week of aid fell to 3.322 million, the Labor Department said.