The number of people seeking unemployment aid last week fell to its lowest level since mid-May, suggesting layoffs are easing and hiring could pick up.
The Labor Department said Thursday that weekly unemployment benefit applications dropped by 14,000 to a seasonally adjusted 374,000, the fewest since the week of May 19.
The four-week average, which smoothes out weekly fluctuations, dipped by 1,500 to 385,750.
Weekly benefit applications serve as a measure of the pace of layoffs. When applications consistently fall below 375,000, it generally suggests hiring is strong enough to reduce the unemployment rate.
Unemployment benefit applications declined steadily over the winter, coinciding with a burst of hiring. But they rose in the spring and were stuck near 390,000 for five weeks. During that time, the job market slumped.
Employers added an average of only 73,000 jobs per month in April and May. That's much lower than the average of 226,000 added in the first three months of the year.
The government will release the June jobs report Friday. Economists forecast that employers added only 90,000 jobs last month and the unemployment stayed at 8.2 percent, according to FactSet.
There were other signs Thursday that hiring may have picked up in June.
Payroll provider ADP says businesses added 176,000 jobs last month. That's better than the revised total of 136,000 jobs it reported for May.
But the survey has often deviated sharply from the government report. In May, the Labor Department said employers added just 69,000 jobs, the fewest in a year and nearly half ADP's estimate. The ADP report only covers hiring in the private sector and excludes government job growth.
And most other recent economic data haven't been encouraging.
Retailers are reporting weak sales for June as worries about the economy and jobs are making shoppers pull back on spending. The results raise concerns about Americans' ability to spend for the back-to-school shopping season. Costco Wholesale Corp. reported a gain below Wall Street expectations. Target Corp. also missed estimates, posting a modest increase. Teen retailer Wet Seal Inc. reported a bigger-than-anticipated decline.
The manufacturing sector contracted in June for the first time in three years, the Institute for Supply Management, a trade group, said Monday. Export orders fell, a sign that Europe's debt crisis and weaker growth in big emerging markets, like China and India, are slowing overseas demand for U.S. goods.
Overall, new orders plunged by the most in a decade, the ISM report showed. That suggests domestic demand for manufactured goods is also falling.
The economy isn't growing fast enough to support stronger job gains. It expanded at a 1.9 percent pace in the first three months of the year. That's down from a 3 percent pace in the final quarter of last year.
A closely watched private survey released last week showed consumer confidence fell in June for the fourth straight month. The Conference Board said worries about the job market outweighed lower gas prices and steady improvement in the housing market.