WASHINGTON -- The number of people requesting unemployment benefits last week plunged to a nearly three-year low, bolstering the likelihood that companies will increase the pace of hiring this year.
Applications for unemployment benefits fell by 20,000 to a seasonally adjusted 368,000, the Labor Department reported Thursday. It was the third decline in the last four weeks.
Applications are now at their lowest level since May 2008.
The four-week average for applications, a less volatile figure, fell last week to 388,500. That's the lowest level since July 2008, the last time the four-week average was below 400,000.
Applications that remain consistently below 375,000 tend to signal declines in the unemployment rate. Unemployment benefit applications peaked during the recession at 651,000.
Analysts are predicting strong job gains in the February employment report, which the government will release on Friday. Brightening the outlook for more aggressive hiring, the manufacturing sector is growing at the fastest pace in nearly seven years and retailers are reporting strong gains for February after the best holiday shopping season since 2006.
"Often at this stage of the recovery, when these signals are in place, we see a surge in hiring," said John Ryding, an economist with RDQ Economics.
Employers probably added 175,000 new jobs in February, economists predict. That would mark an improvement from an anemic 36,000 in January when snowstorms and bad weather hurt job gains. The government releases the employment report for February on Friday.
At the same time, economists think the unemployment rate edged up to 9.1 percent in February. Unemployment could soon rise if an improving economy causes more out-of-work people who aren't looking for jobs to start. People out of work aren't counted as unemployed unless they're looking for a job. During a weak economy, some unemployed people become discouraged and stop looking.
Separately, retailers on Thursday reported solid revenue gains for February, extending the strong spending momentum seen during the holiday season. Limited Brands Inc. and Macy's Inc. reported gains that beat Wall Street expectations, while Target Corp. announced an increase slightly below analysts' projections. The figures are based on revenue at stores open at least a year and are considered a key indicator of a retailer's health.
Another report Thursday confirmed that workers increased their productivity in the final three months of 2010 at the fastest pace in nine months.
The downward trend in applications suggests that companies are easing the pace of layoffs now that the economy is gaining momentum. During the recession, companies slashed work forces, cut or froze workers' pay and took other aggressive steps to reduce costs. Stronger job creation is needed to steadily reduce unemployment. The economy needs to produce at least 200,000 a month on a consistent basis for that to happen.
Thursday's report also showed the number of people receiving unemployment benefits dropped to 3.77 million, the lowest level since mid-October 2008.
That doesn't include millions of people enrolled in emergency unemployment benefit programs funded by the federal government. Another 4.5 million unemployed workers received benefits under the extended programs during the ending Feb. 12, the latest data available. Altogether, 9.2 million people were on the benefit rolls that week.