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WRAPUP 1-U.S. private payrolls surge in May; layoffs also jump

* Private payrolls jump by 253,000 in May

* Weekly jobless claims increase by 13,000

* Announced layoffs surge 41 percent in May

WASHINGTON, June 1 (Reuters) - U.S. private employers stepped up hiring in May, signaling that the labor market was rapidly tightening amid a firming economy, which could encourage the Federal Reserve to raise interest rates later this month.

While other data on Thursday showed a jump in the number of Americans filing for unemployment benefits last week, the data was probably distorted by the Memorial Day holiday. Claims for eight states, including California, had to be estimated.

According to the ADP National Employment Report, private payrolls increased by 253,000 jobs last month, beating economists' expectations for a gain of 185,000 jobs. Private payrolls rose by 174,000 jobs in April.

The ADP report is jointly developed with Moody's Analytics and was released ahead of the Labor Department's more comprehensive nonfarm payrolls report on Friday, which includes both public and private-sector employment.

"The report suggests tomorrow's jobs report will support a June rate hike," said Chris Low, chief economist at FTN Financial in New York.

According to a Reuters survey of economists, payrolls likely increased by 185,000 jobs in May after a gain of 211,000 in April. The unemployment rate is forecast to be unchanged at a 10-year low of 4.4 percent.

Prices of U.S. Treasuries were trading lower while U.S. stock market futures edged higher. The dollar was firmer against a basket of currencies.

WORKER SHORTAGES

In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits jumped 13,000 to a seasonally adjusted 248,000 for the week ended May 27.

It was the 117th straight week that claims were below 300,000, a threshold associated with a healthy labor market. That is the longest such stretch since 1970, when the labor market was smaller.

A Labor Department official said claims for California, Hawaii, Kansas, Kentucky, Louisiana, North Dakota, Texas and Virginia were estimated because of the Memorial Day holiday.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose only 2,500 to 238,000 last week.

The Fed said on Wednesday in its Beige Book report of anecdotal information on business activity collected from contacts nationwide that labor markets continued to tighten from early April through late May.

The U.S. central bank said "most" districts had cited worker shortages across a broadening range of occupations and regions. Economists expect the Fed will raise interest rates by 25 basis points at its June 13-14 policy meeting.

The claims report also showed the number of people still receiving benefits after an initial week of aid fell 9,000 to 1.92 million in the week ended May 20. The so-called continuing claims now have been below 2 million for seven straight weeks, pointing to shrinking labor market slack.

A third report by global outplacement consultancy Challenger, Gray & Christmas showed layoffs announced by U.S.-based employers surged 41 percent to 51,692 in May. Nearly 40 percent of the job cuts were announced by Ford Motor Co , according to the report. (Reporting by Lucia Mutikani; Additional reporting by Dan Burns in New York; Editing by Paul Simao)