The surprise jump in private sector payroll data reinforces that hiring is improving and has traders speculating that the government's December employment report could be more robust than economists expect.
ADP reported private sector job growth of 238,000 for the month of December, including a surge of 48,000 jobs in construction, the best in that sector since 2006.
Reuters reports that the consensus among economists for Friday's December employment report is 196,000 nonfarm payrolls—down from 203,000 actual in November—with the unemployment rate unchanged at 7 percent.
The ADP report supports the view that the Fed will proceed with the planned $10 billion taper of its $85 billion monthly bond-buying program this month and further reduce purchases at subsequent meetings. The number is viewed as a guide but not an accurate barometer for Friday's government payroll data—an important metric for the Fed in its policy making.
(Read more: Private sector job growth is off and running)
"How fast they ultimately taper will be data dependent, and if we keep getting these upside surprises it could be faster than people think," said Diane Swonk, chief economist at Mesirow Financial. She expects the Fed to wind down its bond buying by August.
Gabe Mann, Treasury strategist at RBS, said the bond market was already looking for a December jobs number as high as 215,000 and that the ADP number could push up those expectations.
In fact, Goldman Sachs economists bumped their consensus forecast of 175,000 for December nonfarm payrolls to 200,000 after the ADP report. In a note, they cited the report as well as improvement in the ISM nonmanufacturing employment index for the increase.
JPMorgan economists said the ADP report put their 215,000 nonfarm payroll forecast at risk, but they left the estimate unchanged. Citigroup economists raised their forecast to 165,000 from 125,000, and on the other end of the spectrum, Deutsche Bank economists boosted their forecast to 250,000 from 200,000.
The National Federation of Independent Business later said its small business survey showed owners increased employment by an average of 0.24 workers per firm in December, the best reading since February, 2006.
The Goldman economists and others have noted that ADP has not yet proved itself to be a reliable metric for jobs growth, but it is getting more attention since changing its methodology in 2012. Its report also showed a revision in November, to 229,000 from 215,000. Economists had expected ADP to report 200,000 jobs for December.