The number of Americans seeking unemployment benefits dipped 2,000 last week to a seasonally adjusted 339,000, evidence that layoffs are low and hiring will likely remain steady.
The Labor Department said Thursday that the less volatile four-week average rose 8,500 to 357,250.
The average was driven up in recent weeks by spikes that reflected seasonal volatility around the Thanksgiving and Christmas holidays. The government struggles to account for seasonal hiring by retailers and other businesses and for temporary layoffs of school employees during the holidays.
Applications are a proxy for layoffs. They appear to have stabilized near pre-recession levels and are at a level consistent with solid hiring.
The job market has picked up in recent months. Employers have added an average of 200,000 jobs a month from August through November. That's helped lower the unemployment rate to a five-year low of 7 percent.
Still, nearly 4.5 million people received some form of unemployment benefits in the week ending Dec. 14, the latest data available. That's 180,000 more than the previous week.
Of those recipients, about 1.3 million stand to lose their benefits this month, according to the National Employment Law Project, an advocacy group. That's because Congress opted not to renew an emergency federal program, which provided up to 47 weeks of additional benefits. The program expired last week.
Economists predict that the benefit cutoff will cause the unemployment rate to fall by as much as a quarter of percentage point in early 2014. But they worry that the drop will likely occur because many of the former recipients will give up on their job searches, which are required in order to receive benefits. The government counts people as unemployed only if they're actively seeking jobs.
The job market appears to be strengthening and there have been other signs that the economy is improving. Americans are more confident and spending more. And orders to U.S. manufacturers jumped in November, evidence that businesses are spending more on factory-made items such as machinery, computers and electrical goods.
Not all the data have been positive. Income rose at a slower pace than spending last month. That means Americans saved less to spend more. And existing home sales have fallen for three straight months, held back by higher prices and mortgage rates.
Still, the economy expanded at a 4.1 percent annual rate in the July-September quarter, the best growth in nearly two years. The healthy gain largely reflected a jump in restocking. That's unlikely to be repeated in the current October-December quarter. But many economists have become more optimistic about the fourth quarter and expect growth will clock in at a solid 2.5 percent annual rate.