U.S. companies added 170,000 workers in January, reflecting jobgains in services and at small businesses, according to a privatereport based on payrolls.

The increase was less than forecast and followed a revised292,000 rise the prior month that was less than previouslyreported, the report from the Roseland, New Jersey-based ADPEmployer Services showed today. The median estimate in a BloombergNews survey of economists called for an advance of 182,000.

“The job market continues to grow at a moderate pace,” JonathanBasile, a senior economist at Credit Suisse in New York, saidbefore the report. “We're on a gradually improving path for thelabor market.”

More hiring is needed to spur consumer spending, which accountsfor about 70 percent of the world's largest economy. A LaborDepartment report in two days may show payrolls last month rose by145,000 and the unemployment rate held at 8.5 percent, economistsin a Bloomberg survey projected.

The projections for the change ADP employment ranged from145,000 to 300,000, based on the estimates of 40 economistssurveyed by Bloomberg.

The slowdown in hiring from the prior month may be explained bythe so-called purge effect. Workers, regardless of when they aredismissed or quit, sometimes remain on company records untilDecember, when businesses update, or purge, their figures withADP.

The paycheck processor estimates this change when adjusting itsdata for seasonal variations and, because there were fewer firingsat the end of 2011 than in previous years, ADP may have found itmore difficult to formulate a projection.

“Employment grew in all the major sectors of the economy,” JoelPrakken, senior managing director at Macroeconomic Advisers LLC inSt. Louis, which produces the data with ADP, said in a statement.“Other indicators suggest some firming of labor market conditionsas well.”

ADP's initial figures for December showed a 325,000 gain, whilethe Labor Department's data a day later registered an increase of212,000 in private payrolls for the month.

Goods-producing industries, which include manufacturers andconstruction companies, climbed by 18,000 workers, today's ADPfigures showed. Employment in factories added 10,000 jobs.

Service providers took on 152,000 workers.

Companies employing more than 499 workers added 3,000 jobs.Medium-sized businesses, with 50 to 499 employees, added 72,000workers and small companies increased payrolls by 95,000, ADPsaid.

Federal Reserve

Concern about the high number of jobless Americans is one reasonwhy the Federal Reserve last week said it would keep its benchmarklending rate near zero “at least” until late 2014 from a priortarget of mid-2013.

“While indicators point to some further improvement in overalllabor market conditions, the unemployment rate remains elevated,”Fed policy makers said after their meeting.

The Labor Department's report in two days may show privatepayrolls rose by 165,000 in January, according to the Bloombergsurvey median. Overall hiring, which includes government jobs, mayhave slowed to 145,000 after rising 200,000 in December.

The ADP report is based on data from about 344,000 businesseswith more than 21 million workers on payrolls. MacroeconomicAdvisers LLC in St. Louis produces the data with ADP.

Bloomberg News