U.S. companies stepped up hiring in May, a private survey found, evidence that employers remain confident in the economy even after it contracted at the start of the year.

Payroll processor ADP said Wednesday that businesses added 201,000 jobs last month, up from just 165,000 in the previous month. April's increase was the smallest in a year and a half.

The figures suggest that the economy is recovering after it shrank at a 0.7 percent annual rate in the first quarter. On Friday, the government will issue its official jobs report for May. Economists forecast it will show that employers added 227,000 jobs, and the unemployment rate remained 5.4 percent.

"The relative strength in today's report is an encouraging sign that the labor market, and the economy, is reaccelerating," Dan Greenhaus, chief strategist at brokerage BTIG LLC, said in a note to clients.

The ADP survey covers only private businesses, however, and frequently diverges from the official figures.

Construction companies added 27,000 jobs, ADP said, the most in four months. That's a sign that developers are ramping up homebuilding, an important driver for the economy.

Manufacturers cut 5,000 jobs, the third straight decline. The drop in factory jobs likely reflects the impact of the stronger dollar, which makes U.S. goods more expensive overseas and cuts into export sales.

Services were the main driver of job growth, adding 192,000 jobs. Those gains were led by shipping, retail, and professional and business services, which includes higher-paying industries such as accounting and engineering.

Other recent reports have painted a mixed picture of the economy. Consumers remain cautious and are reluctant to spend their savings from lower gas prices, which are about $1 a gallon cheaper than a year ago. On Monday, the government said consumer spending was unchanged in April. Instead, the saving rate rose to 5.6 percent from 5.2 percent.

Yet Americans were willing to spend more on cars last month. Auto sales rose 2 percent in May to 1.64 million cars and trucks, according to Autodata Corp. That was the fastest sales pace since July 2005.

And a survey of manufacturing firms showed that factory activity grew at a faster pace in May than the previous month, driven higher by more new orders and greater hiring.

Overall, analysts expect the economy will expand at about a 2 percent annual pace in the second quarter. That would leave growth in the first half of the year barely above 0.5 percent, down from a 3.6 percent pace in the second half of last year.