U.S. private employers added 176,000 jobs in August and new claims for jobless benefits fell last week, which could bolster expectations the U.S. Federal Reserve will begin winding down a bond-buying stimulus program this month.
Payrolls processor Automatic Data Processing (ADP) said on Thursday private sector employment expanded less than in July, but analysts said the data still backed the consensus view that a more comprehensive employment report, due on Friday, will show improvement.
"(It's) enough to reinforce expectations that the Fed will begin to taper its asset purchases," said Paul Ashworth, an economist at Capital Economics in Toronto.
U.S. Treasury debt prices fell to session lows after the data, with the yield on the two-year note rising above 0.5 percent for the first time since June 2011 on bets the Fed would start to reduce bond purchases soon. Stock futures were little changed while the dollar gained against the euro.
Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 180,000 jobs. July's private payrolls gains were revised to 198,000 from the previously reported 200,000.
The report is jointly developed with Moody's Analytics.
The ADP data comes one day before the U.S. government's report on August non-farm payrolls, which investors will scour in hopes of divining the future direction of the Fed's massive asset-buying program.
The Fed is now weighing when to pull back on its purchases of $85 billion per month in Treasuries and mortgage-backed securities.
Views that the Fed could slow its buying pace as soon as its September 17-18 meeting sent Treasuries yields to two-year highs recently.
But policymakers say their decisions will depend on data showing the health of the world's biggest economy. Policymakers want to see the unemployment rate closer to 6.5 percent from its current 7.4 percent.
Economists in a Reuters poll, however, see the August unemployment rate remaining flat.
Separately, the Labor Department said the number of Americans filing new claims for jobless benefits fell 9,000 last week to 323,000, a near five-year low.
Economists polled by Reuters had expected first-time applications to fall to 330,000 last week.
The four-week moving average for new claims fell to its lowest level since October 2007, before the 2007-09 recession began. This measure, which is closely followed because it irons out week-to-week volatility, dipped 3,000 to 328,500.
The report has no direct bearing on Friday's monthly employment report, but it could reinforce confidence that the labor market is posting a slow yet steady comeback.
Still, the U.S. economic recovery has largely skirted many Americans, who are frustrated over a slow pace of wage gains in recent years.
A separate Labor Department report showed U.S. labor costs were flat in the second quarter, a sign of minimal inflationary pressures in the economy that could fan concerns inflation is too low.
The reading, which revised down an earlier estimate for the data, was well below the 0.8 percent gain analysts were forecasting in a Reuters poll.
At the same time, the report showed productivity rose 2.3 percent during the period, which was a bigger gain than expected and gave a more hopeful sign for the outlook for wages.
Over the last year, inflation has been well below the U.S. Federal Reserve's 2 percent target, which has led some analysts to expect the Fed will be slow about winding down the bond-buying program.
Extremely low inflation is scary because it raises the risk an economic shock - say, a meltdown in Europe or in emerging markets - could tip the economy into a downward spiral of falling prices and wages known as deflation.
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