Fewer people applied for unemployment benefits last week, adding to evidence that hiring will pick up this year.
The Labor Department said Thursday that the number of people seeking benefits fell by 37,000 to a seasonally adjusted 404,000 for the week ended Jan. 15. That's not much higher than the 391,000 level reached last month, the lowest in more than two years.
The decline suggested that an unexpected rise in applications a week earlier was the result of seasonal factors. Applications often rise in early January after retailers lay off temporary holiday workers.
Fewer than 425,000 people applying for benefits is considered a signal of modest job growth. Economists say applications must fall consistently to 375,000 or fewer to substantially reduce the unemployment rate.
Applications are far below their peak during the recession of 651,000, reached in March 2009. They have fallen by about 16 percent over the past four months, signaling employers are laying off fewer workers.
Last week's decline reduced the four-week moving average, a less volatile measure, to 411,750. That's the third decline in four weeks.
Ian Shepherdson, chief U.S. economist at High Frequency Economics said the downward trend is driven by the easing credit situation for small firms.
"More credit means fewer layoffs, and fewer layoffs mean stronger payroll growth," Shepherdson said. "It won't be long before the jobs numbers look better."
Net job gains in December were modest. Employers added only 103,000 jobs, less than half of the total needed to reduce the unemployment rate.
The unemployment rate fell to 9.4 percent from 9.8 percent last month. About half that drop came from unemployed workers giving up on their job searches. The government only counts as unemployed people who are still looking for work.
The number of people continuing to receive unemployment benefits fell to 3.9 million in the week ending Jan. 8, its lowest level since October 2008. But that may just mean many people have exhausted their 26 weeks of state benefits.
The figure 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.
© Copyright 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.