U.S. businesses in May added the most jobs in nearly a year, suggesting companies are making headway filling a record number of vacancies as the economy strengthens.

The 978,000 increase in private payrolls was the largest since June 2020 and reflected a large pickup in hiring in the leisure and hospitality industry, according to ADP Research Institute data released Thursday.

The ADP figures were followed by another positive reading for the jobs market: A separate government report showed applications for unemployment benefits fell for a fifth straight week.

The stronger pace of hiring suggests firms are having greater success filling open positions as the removal of pandemic-related restrictions and increased social activity spurs demand. Last month, federal health officials reconsidered mask guidance for vaccinated Americans and states moved away from restrictions on businesses.

The ADP data precede the monthly jobs report for May—due out Friday—which is currently forecast to show the economy added 600,000 private-sector jobs in May.

“While goods producers grew at a steady pace, it is service providers that accounted for the lion’s share of the gains, far outpacing the monthly average in the last six months,” Nela Richardson, ADP’s chief economist, said in a statement.

U.S. equities fell, the dollar strengthened and 10-year Treasury yields rose on Thursday as investors digested the latest economic data and mounting geopolitical tensions.

Employment rose by 128,000 in goods-producing industries and 850,000 among service-providers. The largest payrolls gain was in leisure and hospitality, which posted a 440,000 jump from a month earlier, also the largest advance in 11 months.

Payrolls rose by 119,000 in health care, 65,000 in construction and 68,000 in business services.

Hiring was consistent across all business sizes, including a 333,000 gain at small businesses. ADP’s payroll data represent firms employing almost 26 million workers in the U.S.

The report’s overall increase exceeded forecasts, with the median projection in a Bloomberg survey of economists calling for a May increase of 650,000. April employment was revised down to a 654,000 gain.

The separate data on jobless claims reported by the Labor Department on Thursday showed applications for state unemployment benefits decreased last week to below 400,000 for the first time in the pandemic.

—With assistance from Chris Middleton.

This article was provided by Bloomberg News.