The pace of growth in the massive services sector rose in August on the back of a rebound in employment, beating expectations, though a measure of new orders declined, according to an industry report.
The Institute for Supply Management said on Thursday its services index jumped to 53.7 last month from 52.6 in July. That beat economists' forecasts for a 52.5 reading.
A reading above 50 indicates expansion in the sector.
U.S. stocks ticked up, and the dollar rose against the euro, after the ISM release showed the third straight month of higher growth in services.
ISM's gauge of employment reached its highest level since April, climbing to 53.8 from a July reading of 49.3, which was the lowest level in nearly a year. However, forward-looking new orders dipped in August to 53.7 from 54.3 in July.
The ISM report was the third piece of economic data on Thursday - following ADP and Challenger reports on employment - that suggested the struggling U.S. job market may have gained some traction last month.
On Friday, the government releases the highly anticipated August payrolls report.
"I think it is a good reading. The market was expecting a little bit of a drop," Eric Viloria, senior currency strategist at Forex.com, said of the ISM report, adding that Thursday's combined economic data "bodes well for tomorrow's labor report."
ISM's measure of exports rose to 52 from 51 in the previous month, while imports advanced to 49.5 from 44.5. The prices paid index for August reached its highest level since February.
ISM's measure of services follows a downbeat ISM report on Tuesday that showed the U.S. manufacturing sector shrank at its sharpest clip in more than three years.
Some economists expect the Federal Reserve, deeply concerned about the stubbornly high U.S. unemployment rate, which was 8.3 percent in July, to ease policy more at a meeting next week.
(Reporting by Jonathan Spicer; Editing by James Dalgleish)