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The number of Americans who applied for unemployment benefits fell by 4,000 last week to a seasonally adjusted 323,000, a fresh five-year low. The decline signals fewer layoffs and possibly more hiring.
The Labor Department said Thursday that the four-week average, a less volatile figure, dropped 6,250 to 336,750. That the fewest since November 2007, before the recession began.
Applications are a proxy for layoffs. Weekly applications have fallen about 9 percent since November and are now at a level consistent with a healthy economy.
The job market has also improved over the past six months. Net job gains have averaged of 208,000 a month from November through April. That's up from only 138,000 a month in the previous six months.
Still, much of the job growth has come from fewer layoffs — not increased hiring. Layoffs fell in January to the lowest level on records dating back 12 years, though they have risen moderately since then. At the same time, overall hiring remains far below pre-recession levels and unemployment remains high at 7.5 percent.
For hiring to increase enough to rapidly lower the unemployment rate, companies must gain more confidence in the economy. But some have held off adding new workers in recent months, possibly because of concerns about the impact of federal spending cuts and tax increases. And an increase in Social Security taxes could slow consumer spending, which drives nearly two-thirds of economic activity.
The Federal Reserve said last week that the federal government's policy changes are "restraining economic growth."
Still, even modest job gains could provide consumers with more money to offset the impact of the tax increase. Total wages rose 3.6 percent in April compared with a year earlier. That's comfortably ahead of the 1.5 percent inflation rate.
The economy grew at an annual rate of 2.5 percent from January through March, a big improvement from the anemic growth of 0.4 percent in the final three months of last year. But most economists expect growth will slow in the current quarter to 2 percent or lower.