Fewer Americans sought unemployment aid last week, reducing the average number of weekly applications last month to a five-year low. The drop shows that fewer layoffs are strengthening the job market.
The Labor Department said Thursday applications fell 10,000 to a seasonally adjusted 332,000. That reduced the four-week average to 346,750, the lowest since the week of March 8, 2008.
The report "provides further evidence of a gradual strengthening in labor market conditions," Paul Dales, senior U.S. economist at Capital Economics, said in a note to clients.
Applications for unemployment aid are a proxy for layoffs, and their steady decline signals companies are laying off fewer workers. It also suggests companies aren't worried business might fall off in the near future.
The number of applications for benefits has dropped five times in the past six weeks and has declined 13 percent since mid-November. At the same time, net hiring has picked up. Employers added an average of 200,000 jobs a month from November through February -- up from about 150,000 a month in the previous four months. And the U.S. unemployment rate reached a four-year low of 7.7 percent in February.
During the recession, layoffs spiked, and applications for jobless benefits peaked at 667,000 in the week that ended March 28, 2009. In a healthy economy, applications usually are between 300,000 and 350,000.
Applications may pick up in coming weeks, though, as spending cuts force many federal agencies and government contractors to lay off or furlough workers. The spending cuts, which took effect March 1, were mandated by a 2011 budget deal.
Bricklin Dwyer, an economist at BNP Paribas, estimates that the government spending cuts will boost applications for unemployment aid by about 15,000 a week in the second half of March and between 15,000 and 20,000 a week in April.