Shares of staffing companies soared on Friday after a government report showing U.S. employers cut far fewer jobs than expected last month heralded increased demand for the companies' services as the labor market improves.

The economy shed 11,000 jobs in November, far below the 130,000 loss financial markets had expected, while the unemployment rate unexpectedly dropped to 10 percent from October's 10.2 percent, according to a government report.

There's a lot of good news in this report, Tig Gilliam, who heads North American operations for global staffing giant Adecco SA , told Reuters. The economy could start to add jobs as early as January and should certainly do so in the first quarter, he said.

This is one of the best reports we have seen in some time, helping us gain greater confidence that a labor recovery has begun, wrote BMO Capital Markets analyst Jeff Silber in a note to clients. Staffing stocks should have a good day today.

The creation of 52,000 temporary jobs is an especially positive sign because temporary hiring precedes permanent hiring, staffing company executives said.

This is an indicator that employers are feeling more confident, said Scot Melland, Chief Executive of Dice Holdings Inc , a specialist in technology, finance and health care jobs who over the course of the year has seen employers posting more jobs and doing more searches through the company's online resume banks.

But a pleasant surprise this month does not necessarily signal an uninterrupted upward trend into the indefinite future, said Roy Krause, Chief Executive of Spherion Corp : We're going to see some ups and downs. Growth is going to be lumpy, he said.

Stocks rose across the board, with the Standard & Poor's 500 index <.SPX> up 0.2 percent, but staffing company shares outpaced the broader market.

Staffing companies typically track the government's job data, said Krause. The whole sector was beaten down a year ago, Krause said. If the jobs numbers are going up, people figure maybe they should own the stock.

Dice Holdings was up 8.3 percent in early afternoon trading on the New York Stock Exchange; Spherion's shares were up 12.55 percent and Adecco's shares were up 7.7 percent.

For graphics on the jobless rate and payrolls, see http://graphics.thomsonreuters.com/109/US_UNEMPL1009.gif

(Reporting by Helen Chernikoff and Lucia Mutikani; Editing by Phil Berlowitz and Gunna Dickson)

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