WASHINGTON — A steady decline in the number of Americans applying for weekly unemployment benefits is the latest signal that the U.S. economy has strengthened and businesses may be poised to step up hiring.
Applications fell last week fell to a seasonally adjusted 381,000, the Labor Department said Thursday. That’s the lowest level since late February.
And a four-week average for applications, which smooths week-to-week fluctuations, fell for the ninth time in 11 weeks to an eight-month low.
The downward trend in unemployment benefit applications bolsters the view that the economy has improved from its spring slump, when many feared another recession was likely. Consumer confidence is up, retailers reported a strong start to the holiday shopping season and the unemployment rate fell last month to its lowest point in two and a half years.
“There have been numerous indications that the labor market is healing and today’s jobless claims report only reinforces that view,” Dan Greenhaus, chief global strategist at BTIG, a trading firm.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the drop in unemployment benefit claims reflects relief among businesses that consumer demand didn’t plunge this fall as some had feared.
“We expect claims to head slowly downwards for the foreseeable future, and in due course payroll growth will accelerate,” Shepherdson said in a note to clients.
Applications that drop below 375,000 — consistently — tend to correlate with a steady decline in the unemployment rate.
Five straight months of 100,000-plus jobs added
The unemployment rate fell to 8.6 percent in November, the government said last week, down from 9 percent the previous month. Still, the rate dropped last month in part because more people gave up looking for work. Once the unemployed stop looking for jobs and drop out of the work force, they are no longer counted as unemployed.
Employers added a net total of 120,000 jobs last month. The economy has generated 100,000 or more jobs five months in a row — the first time that has happened since April 2006.
Many economists expect growth to accelerate in the final three months of the year, to about a 3 percent annual rate. That would be an improvement from 2 percent growth in the July-September period.
But the U.S. economy is vulnerable to shocks from overseas. European leaders are struggling to contain a two-year old debt crisis and the 17 nations that use the euro may already be in recession, economists say.
That could slow U.S. exports and cut into overseas profits earned by U.S. multinationals. Even worse, the crisis could force European banks to cut back on lending and U.S. banks to follow suit, leading to a credit crunch. Most economists are penciling in slower U.S. growth next year, partly because of Europe’s slowdown.
Fewer people are receiving unemployment benefits, and the number of people on extended benefits also fell. Some of that decline is because those out of work found jobs. But economists think most have likely used up all their benefits.
The number of people receiving benefits fell by 174,000 to 3.58 million. But that doesn’t include several million people receiving aid under extended programs put in place during the recession. All told, 6.6 million people received unemployment aid in the week ending Nov. 19, the latest data available. That’s about 400,000 fewer than the previous week.
Congress is debating whether to continue the extended benefit program, which expires at the end of this year. The program provides up to 99 weeks of benefits in states with high unemployment rates. If the program isn’t continued, the Labor Department estimates that about 1.8 million people could lose benefits by early February.