Report: 163,000 private jobs added

The ADP report is closely watched as a gauge of job growth, although it does not include public-sector employment, which the government's report does.

But the ADP report is not always a reliable indicator. In June, the Bureau of Labor Statistics said the private sector added less than half as many jobs as ADP had reported.

Jonathan Basile, director of economics for Credit Suisse, noted that during the last year, ADP has overshot the government's figure by an average of 58,000 jobs.

Economists are projecting that Friday's report will show that the economy added about 100,000 net new jobs in July, keeping unemployment at 8.2 percent.

But Wednesday's ADP figures were strong enough to suggest that the unemployment rate could go down, said Joel Prakken, chairman of Macroeconomic Advisers.

"Today's estimate from ADP, if reinforced by a similar reading on employment from the BLS on Friday," he said, "will alleviate concerns that the economy has slipped into a downturn."

ADP said the service industry provided the biggest job gains in July, adding 148,000 positions, down slightly from 151,000 in June. Manufacturing employment added 6,000 net new jobs, down from 9,000 in June. The hard-hit construction industry saw job gains for the second straight month, adding 5,000 net new jobs.