The number of people applying for unemployment benefits over the past month has reached its lowest point since July 2008, raising hopes that hiring is about to accelerate.
The drop in applications is the latest sign that the economy is improving, and economists expect Friday’s employment report for December to show a solid gain in jobs.
“The economy is gaining momentum, and the job market, which has been the recovery’s caboose, is starting to catch up,” said Zach Pandl, an economist at Nomura Securities.
Applications for unemployment benefits actually rose last week to a seasonally adjusted 409,000, the Labor Department said Thursday. Still, that’s not much higher than the 391,000 level reached in the previous week – the lowest in more than two years – and week to week figures tend to fluctuate more during the holidays.
A more reliable measure is the four-week average for applications. That fell last week to 410,750, the lowest level in nearly two and a half years and the eighth decline in nine weeks.
Fewer than 425,000 people applying for benefits signals modest job growth. And applications are far below their peak during the recession of 651,000, reached in March 2009. Still, economists say applications need to fall consistently to 375,000 or below to substantially bring down the unemployment rate.
The declines won’t matter much to most Americans until they are accompanied by significant job gains and a drop in the 9.8 percent unemployment rate.
Economists expect the government to report Friday that employers added a net total of 145,000 jobs and the unemployment rate fell to 9.7 percent last month. Some are raising their forecasts after payroll services provider ADP said Wednesday that private employers added a net total of 297,000 new jobs last month. That’s the most in the ten years that ADP has tracked the data.
The ADP’s figures have usually differed from the government’s – sometimes by a wide margin – and many economists cautioned against reading too much into the numbers. But some say it’s a sign that Friday’s government report will show major gains.
Nigel Gault, chief U.S. economist at IHS Global Insight, said Wednesday he now expects December’s job gains to be 190,000, up from a previous forecast of 150,000.
Separately, the International Council of Shopping Centers reported that consumers increased their spending in November and December 3.8 percent, the largest increase in holiday spending since 2006. But most of the gain was in November. Spending slowed in December.
The weekly unemployment benefits figures provide a real-time snapshot of the job market. Applications reflect the level of layoffs, but can also indicate whether companies are willing to hire.
The unemployment applications figures can be less reliable around the winter holidays because there are large numbers of seasonal layoffs by retailers, construction companies and other employers. Bad weather can also make it harder for laid-off workers to apply for benefits.
The number of people continuing to receive unemployment benefits fell by 47,000 to 4.1 million in the week ending Dec. 25, the department said. That doesn’t include millions of long-term unemployed who are receiving extended benefits from the federal government under an emergency program set up during the recession.
Another 4.5 million people received benefits under the extended program, which offers up to 99 weeks of aid in states with high unemployment. All told, about 8.8 million people were on the benefit rolls in the week ending Dec. 18, the most recent data available.
That’s down from about 8.9 million in the previous week. Economists say that many recipients likely used up all their benefits, while some may have gotten jobs.