The private sector added a white-hot 325,000 jobs in December, for the best gain in a year, according to a report Thursday from payroll processing giant Automatic Data Processing.

The report works to capture the monthly change in nonfarm private sector job changes. Forecasters had expected to see a gain of 175,000, following the revised 204,000 gain in November.

"December's advance was the largest monthly gain since December 2010, reflecting strong job creation across most industries," said ADP President and Chief Executive Carlos Rodriguez. "Small and medium-sized businesses were hiring at a similar pace," he said, adding that "job creation among large employers was also encouraging."

In the report, large firms added 37,000 jobs, while the service sector as a whole added 273,000 new employees. The goods-producing sector added 52,000.

The ADP report comes just ahead of Friday's release of the December nonfarm payrolls report. The Friday report is frequently the most important release in any given month's calendar of economic events, offering key insights into the health of the economy.

The challenge for financial markets is that the job data generated in the ADP report doesn't line up all that well with the data produced by the government. Economists currently expect that the improvements that have been seen in hiring over recent months will have continued into the final month of the year, with the nation expected to have added 155,000 jobs, versus the 120,000-job gain in November. The unemployment rate is seen ticking up a hair to 8.7%, from 8.6%.

Macroeconomic Advisers' Joel Prakken, who partners with ADP to create the report, was cautiously optimistic about the report. "If you put this figure in a larger context, you can still feel pretty comfortable there's a nice signal in this number," Prakken said. But the economist added "I want to be a little cautious about this number" given the magnitude of the gain.

Prakken noted it's entirely possible seasonal factors distorted the December number and made it look better than it should have. But he said the overall direction of the number is undeniable, and it's possible the unemployment rate will fall further from what is now a 8.6% level. Prakken did note that government hiring is not captured in the ADP report, and that it may have a negative influence on the national hiring data due on Friday.

The very large job gain reported for December caught Wall Street off guard. "Nothing is at face value when it comes to ADP," said Eric Green of TD Securities. "We were bullish on the number Friday, comfortably above consensus, but not this bullish and do not expect a payroll gain tomorrow to reflect this ADP number," he said.

The good news seen in the ADP data was backed up by the weekly data on first time claims for unemployment insurance. That fell by a wider-than-expected 15,000, to 372,000 for the week.

   -By Michael S. Derby; Dow Jones Newswires, 212-416-2214 
   michael.derby@dowjones.com
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