String of reports boosts hopes of strong August job gains

— -- Businesses added 201,000 jobs in August, the most in five months, according to a survey of the private sector, stirring hopes that the government's employment report Friday could show stronger-than-expected gains.

Separate reports Thursday on jobless claims, layoffs and service-sector activity also pointed to a possible pickup in the pace of payroll growth.

Economists' consensus forecast predicts the government will report Friday that the unemployment rate is unchanged at 8.3% and that 127,000 nonfarm jobs were created in August; 138,000 in the private sector minus 11,000 job cuts in federal, state and local governments.

Non-farm job growth has slowed from an average monthly pace of 225,000 in the first quarter to 95,000 the past four months despite a better-than-expected 163,000 increase in July, when the unemployment rate rose to 8.3% from 8.2%.

The 201,000 private-sector additions reported Thursday by the ADP National Employment Report solidly beat economists' estimates of 140,000 job gains. ADP also revised up its estimate of July payroll advances to 173,000 from 163,000.

In August, small businesses with up to 49 workers added 99,000 jobs, while mid-size firms — with 50 to 499 employees — added 86,000. Large companies with 500 or more workers added 16,000, following a recent trend that has seen bigger businesses lagging smaller enterprises in job growth.

The service sector added 185,000 jobs, and goods-producing companies added 16,000, including 3,000 by manufacturers. Construction payrolls rose by 10,000, the best showing since March.

While the report was encouraging, ADP's estimate often has varied significantly from the Labor Department's official tally, despite tracking similar broad trends. This year, for instance, ADP's numbers have differed from the government's by an average 45,000 a month, sometimes overstating job gains and underestimating in other months, according to an analysis by Barclays Capital.

Other employment reports Thursday were also mildly positive. The number of Americans applying for unemployment insurance for the first time fell by 12,000 to 365,000. A four-week average that smooths fluctuations was unchanged at 371,000, below the second-quarter average of 382,000. Jobless claims under 400,000 generally indicate modest employment growth.

Meanwhile, employers announced layoffs of 32,239 workers last month, the fewest since December 2010, according to outplacement firm Challenger Gray and Christmas.

And a measure of service-sector employment rose sharply in August to 53.8 from 49.3 in July, according to the Institute for Supply Management. Its overall index of service-sector activity also increased to 53.7 from 52.6 in July, exceeding estimates. A reading above 50 means the sector is expanding; below 50 means it's contracting.

While ISM's manufacturing index earlier this week showed that the sector shrank for the third straight month in August, the larger service sector, accounting for 90% of economic activity, grew for the 32nd straight month.

"All this evidence suggests that our forecast of a 100,000 increase (in August employment) may be too pessimistic," Paul Ashworth, chief U.S. economist of Capital Economics, said of the encouraging reports on private-sector job gains, jobless claims and layoffs.

Yet Ashworth says it would take August job gains of well more than 200,000 to dissuade the Federal Reserve from taking steps to push down long-term interest rates when its policymakers meet next week.

While the housing market has shown signs of life recently, the economy has been hampered by the European financial crisis and uncertainty among businesses over Congress's ability to soften the impact of large spending cuts and tax increases slated to take effect at year's end.