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The number of Americans seeking unemployment aid fell 22,000 last week to a seasonally adjusted 344,000, evidence that the job market may be picking up.
The four-week average of applications dropped 6,750 to 355,000, the Labor Department said Thursday.
Economists were mildly encouraged by the decline. It "suggests further healing in the labor markets," Sal Guatieri, an economist at BMO Capital Markets, said in a note to clients.
Stronger hiring is one of the reasons economists expect growth is probably picking up in 2013 after a disappointing October-December quarter, when the economy barely grew.
Weekly applications are a proxy for layoffs. When they decline, it suggests companies are cutting fewer workers and may be more willing to hire.
Applications have fallen steadily in recent weeks. The four-week average has declined almost 11 percent since November. At the same time, employers have added an average of 200,000 jobs per month from November through January. That's up from about 150,000 in the previous three months.
In January, the economy added 157,000 jobs. The unemployment rate ticked up to 7.9 percent from 7.8 percent in December. Economists think the rate will slowly decline if hiring continues at last year's monthly pace of 180,000. The unemployment rate fell 0.7 percentage point in 2012.
The drop in applications suggests companies will add more jobs in February than in January, economists said.
The hiring occurred even as growth stumbled in the final three months of the year. The economy barely expanded, growing only 0.1 percent at an annual rate, in the October-December quarter. That's a sharp slowdown from the third quarter, when the economy grew 3.1 percent.
Still, the outlook for the U.S. economy brightened this week after reports showed that Americans are more confident and are buying more new homes. Home prices are also rising steadily, and banks are lending more. Such improvements suggest that the economy is resilient enough to withstand automatic spending cuts that are scheduled to kick in Friday.
The spending cuts could slow economic growth and cost 700,000 jobs, according to the Congressional Budget Office. They could also reduce unemployment benefit checks for those out of work for more than six months by about 11 percent, according to the National Employment Law Project. Benefits average about $320 per week nationwide.
Growth will likely pick up a bit in the January-March quarter to an annual rate of close to 2 percent percent, analysts forecast. That's better than the fourth quarter but below last year's expansion of 2.2 percent.
Meanwhile, a total of nearly 5.8 million people received unemployment aid in the week ended Feb. 9, the latest data available. That's up about 180,000 from the previous week. That figure has fallen from nearly 7.5 million a year ago, partly because some of aid recipients have gotten jobs, while others have used up all the benefits available.
Follow Chris Rugaber on Twitter at https://Twitter.com/ChrisRugaber