Jan. 5 (Bloomberg) -- Consumer confidence in the U.S. rose last week to the highest level in more than five months and the pace of firings declined, showing an improving job market is bolstering the biggest part of the economy.

The Bloomberg Consumer Comfort Index climbed to minus 44.8 in the period ended Dec. 31, the best reading since mid-July, from minus 47.5 the prior week. Applications for jobless benefits decreased by 15,000 during the same time to 372,000, according to Labor Department figures.

A pickup in hiring will further lift Americans' moods, raising the odds household spending, which accounts for about 70 percent of the economy, will keep climbing. A Labor Department report tomorrow may show employers added more workers to payrolls in December, brightening the outlook for growth this year.

'The improvement in the labor market means incomes will grow,' said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston who is the most accurate jobless-claims forecaster over the past two years. 'That will really help consumer spending.'

Shares rose, led by a rally in banking and technology stocks that overcame an early slump among retailers amid disappointing profit forecasts. The Standard & Poor's 500 Index gained 0.3 percent to 1,281.41 at 1:40 p.m. in New York.

Companies added 325,000 workers to payrolls in December, more than forecast, adding to evidence the labor market was gaining momentum heading into 2012, figures from Roseland, New Jersey-based ADP Employer Services also showed today.

Definite 'Strengthening'

'There's definitely a strengthening going on here' in the labor market, Joel Prakken, chairman of Macroeconomic Advisers LLC in St. Louis, said in a press conference after the ADP report.

The jump did come with a caveat. The December ADP number may have reflected the so-called purge effect. Workers, regardless of when they are dismissed or quit, sometimes remain on company records until December, when businesses update, or purge, their figures with ADP.

'There's some possibility that today's number has been pushed up by that idiosyncratic feature of ADP data,' Prakken said. 'In an improving labor market it can lead to an upward bias to seasonal job gains.' Macroeconomic Advisers produces the figures in conjunction with ADP.

Payrolls rose by 150,000 last month after increasing by 120,000 in November, according to the median forecast of economists surveyed by Bloomberg News ahead of tomorrow's report from the Labor Department.

Service Industries

Another report today showed service industries expanded less than forecast in December. The Institute for Supply Management's index of non-manufacturing industries, which account for almost 90 percent of the economy, rose to 52.6 last month from 52 in November, the Tempe, Arizona-based group said today.

The median forecast of economists surveyed by Bloomberg called for an increase to 53. Fifty is the dividing line between expansion and contraction.

In contrast to the U.S., service industries in the U.K. expanded in December at the fastest pace in five months. Australia's trade surplus unexpectedly narrowed in November as slower global growth damped demand for the country's resources.

All three components on the consumer comfort index -- the state of the economy, personal finances, and buying climate -- improved last week.

Holiday Shopping

Same-store sales for the more than 20 companies tracked by Retail Metrics gained 3.6 percent in December, topping the 3.3 percent average of estimates gathered by the Swampscott, Massachusetts-based researcher as of yesterday, figures today showed. Macy's Inc., based in Cincinnati, reported a 6.2 percent increase in same-store sales, topping the 4.6 percent estimate.

Results that fell short of analysts' estimates at Gap Inc., Target Corp. and Kohl's Corp. led retail shares lower today, depressing the broader market. The merchants mistimed promotions or ran out of inventory during the holiday shopping season, analysts said.

Demand at Ford Motor Co., General Motors Co. and Chrysler Group LLC exceeded analysts' forecasts in December, other data showed yesterday. Ford's U.S. sales climbed 10 percent from a year earlier, while purchases of Chrysler vehicles were up 37 percent. At GM, they increased 4.5 percent from a year earlier.

Auto Sales

The increase in sales is paced by improving employment, Don Johnson, vice president at GM for U.S. sales, said on a conference call with analysts. 'Consumers are more confident and other underpinnings of our economy are either stable or slowly improving.'

The Bloomberg index is in sync with other surveys. The Conference Board's confidence gauge increased in December to 64.5, the highest level since April, figures from the New York- based private research group showed on Dec. 27.

One reason for the rebound in sentiment is the drop in firings. Over the past four weeks, the average number of jobless claims dropped to the lowest level since June 2008, today's Labor Department showed.

'Claims are moving in the right direction,' said Aneta Markowska, a senior U.S. economist at Societe Generale in New York.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net