Private sector employers added 170,000 jobs in January, according to the monthly national employment report from payroll giant ADP, which saw most of the gains in small and midsized businesses come in the service sector.

Small businesses with between one and 49 employees added 95,000 jobs in January, while midsized businesses with between 50 and 499 employees added 72,000 jobs. Large businesses with 500 employees or more accounted for an additional 3,000 jobs.

The service-providing sector did the most hiring, adding 152,000 jobs, while the goods-producing sector added just 18,000 jobs. Still, Joel Prakken, chairman of Macroeconomic Advisers, which compiles the monthly employment reports with ADP, sees that as a good sign. “We view that as very encouraging,” he said on a conference call with reporters on Wednesday. “The service economy accounts for the lion’s share of employment in the United States, and we cannot have a sustained recovery without it, so that’s heartening.”

He also sees the composition of employment at small and midsized businesses as a favorable sign. Of the 95,000 jobs added at small businesses in January, 84,000 were in the service sector and 11,000 in the goods-producing sector.

Employment in the financial services sector increased 9,000 in January, which is up from an increase of 1,000 in December, and represents the largest gain in two years. However, employment in the construction industry increased by just 2,000 this month, down from an increase of 27,000 in December.

ADP also revised downward its overall employment figures from December, from the initially reported gain of 325,000 jobs to 292,000 (see ADP Sees Private Employers Add 325,000 Jobs in December).

Prakken said the employment figures for the rest of the year will depend on factors such as gross domestic product, which he estimates to be around 2 percent.

“It will take GDP growth of 3 percent or more to see really significant employment growth,” he said. “I’m not doing handstands about what I’m seeing in the economy. Housing remains a drag on the economy, and while financial conditions have eased in Europe, refinancings in Greece are troublesome.”

Prakken also sees a great deal of uncertainty over renewal of the various tax breaks affecting the economy, including the renewal of the payroll tax cut, the Bush tax cuts, and the fix to prevent the alternative minimum tax from spreading to millions more taxpayers, especially in an election year. “The prospects for fiscal drag about a year from now are frightening, either by political calculation or political miscalculation,” he said.