Jobless claims back to pre-recession levels

WASHINGTON The number of Americans seeking unemployment benefits dropped 10,000 last week to a seasonally adjusted 316,000, a sign that workers are in less danger of being laid off.

The less volatile four-week average fell 7,500 to 331,750, the Labor Department said Wednesday. Both the first-time weekly jobless claims and the average have returned to pre-recession levels.

"This is a very pleasant surprise," said Ian Shepherdson, chief economist with Pantheon Macroeconomics, in a research note. "Last week's drop in claims could have been due to seasonal adjustment problems caused by the Veterans' Day holiday, but it's hard to make that case again this week."

Unemployment benefit applications are a proxy for layoffs. They have fallen in six of the past seven weeks. A government spokesman said there were no special factors that drove claims lower but cautioned that it can be difficult to seasonally adjust in late November because the Thanksgiving holiday occurs at different times each year. Thanksgiving falls on Thursday, a week later than last year.

Still, the broader trend has been encouraging. As layoffs have dwindled, hiring has picked up. Employers added 204,000 jobs last month, indicating that companies were undeterred by the 16-day government shutdown. Private businesses added 212,000 new positions, the most since February. The economy has added an average of 202,000 jobs a month from August through October, up from 146,000 in May through July.

"This report reinforces the message that the effects of the shutdown-and-debt-limit saga are being shaken off and the recovery in the labor market is still on track," said Jim O'Sullivan, chief U.S. economist with High Frequency Economics, in a note to clients.

The total number Americans claiming unemployment benefits through the first full week of November was 3.9 million, down from 5.2 million a year ago. Greater employment typically boosts income, which helps drive economic growth. Consumer spending accounts for roughly 70 percent of economic activity.

Despite the improving job market, the unemployment rate remains high at 7.3 percent. That's well above the 5 percent to 6 percent unemployment rate consistent with healthier job markets. When unemployment is lower, workers have more flexibility to change jobs.

Job growth is a major factor for the Federal Reserve in deciding when to reduce its economic stimulus. The Fed has been buying $85 billion in bonds each month to keep long-term interest rates low and encourage borrowing and spending.