WASHINGTON — Applications for unemployment benefits dropped last week to the second-lowest level this year, fresh evidence that companies are cutting fewer jobs.
First-time claims for jobless aid fell by 17,000 to a seasonally-adjusted 421,000 in the week ending Dec. 4, the Labor Department said Thursday.
The four-week average of claims, a less-volatile measure, dropped for the fifth straight week to 427,500. That's the lowest since August 2008, just before the financial crisis intensified with the collapse of Lehman Brothers.
Claims have fallen steadily in the past two months. Applications dropped to 410,000 two weeks ago — the lowest level in more than two years — and they have been below 450,000 for the past five weeks. That is raising hopes that companies will soon accelerate hiring.
Still, claims have only been below 425,000 for two of the last three weeks. Economists say they need to be below that level for an extended period to have any real impact lowering the nation's unemployment rate.
In November the economy added just 39,000 net jobs and the unemployment rate rose to 9.8 percent. Many economists say that was only a temporary setback and that the downward trend in unemployment claims, along with other strong economic data, suggest December will be a stronger month for hiring.
The latest report on jobless claims adds “weight to our view that the November employment report did not provide a very accurate reading on the strength of job creation,” economists at RDQ Economics wrote in a note to clients. “We expect an upward revision to November payrolls and a more solid reading on job creation in December than we saw in November.”
The weekly applications for jobless aid are considered a real-time snapshot of the job market. They reflect the level of layoffs but can also indicate whether companies are willing to add workers.
First-time applications peaked during the recession at 651,000 in March 2009, and then steadily declined to about 470,000 by the beginning of this year. Claims were stuck near that level for most of this year before moving down again in October and November.
The economy is also likely to get a boost from the recent agreement between President Barack Obama and congressional Republicans on taxes and unemployment benefits. The agreement would extend the 2001 and 2003 tax cuts for two years and continue unemployment benefits through the end of 2011. It would also cut payroll taxes and enable businesses to take more tax write-offs for investing in new equipment.
If it becomes law, the deal could boost economic growth next year to 4 percent, from a previous estimate of 2.7 percent, according to Moody's Analytics. That would lower the unemployment rate at a slightly faster pace next year, though many economist think it will still be above 9 percent by the end of 2011.