Fewer seek unemployment aid as job market improves

Jan. 28, 2012: Job seekers Cameo Taylor, left, and Angelique McGuire, center, both of San Francisco, wait in line to register at a Career Fair event in San Francisco. (AP)

WASHINGTON – The number of people seeking unemployment aid fell last week, a sign that companies are cutting fewer jobs and likely stepping up hiring.

Weekly unemployment applications fell 12,000 to a seasonally adjusted 367,000, the Labor Department said Thursday. The four-week average, a less volatile measure, dropped for the third straight week to 375,750.

That's the second-lowest level for the four-week average since June 2008. When applications stay consistently below 375,000, it usually signals that hiring is strong enough to lower the unemployment rate.

The report comes a day before the government will issue its jobs report for January. Economists forecast that the report will show that employers added 155,000 jobs last month, while the unemployment rate remained at 8.5 percent. In December, employers added 200,000 jobs.
Economists forecast that the nation will gain about 160,000 jobs a month this year, according to a survey of economists by the Associated Press. That's up from an average of about 135,000 last year.

Still, the job market has a long way to go before it fully recovers from the damage of the Great Recession, which wiped out 8.7 million jobs. More than 13 million people remain unemployed. Millions more have given up looking for work; they're no longer counted as unemployed.

The economy's growth rate rose in the final three months of last year, to a 2.8 percent annual rate. That was faster than the 1.8 percent pace in the July-September quarter.

Still, a key reason for the growth was that companies restocked their supplies at a robust pace. Restocking is likely to slow in the first three months of this year, which would lead to weaker growth.

Until consumer spending picks up, businesses may be forced to cut back on hiring. But consumers have been weighed down by wages that haven't kept pace with inflation. More jobs and higher pay would invigorate consumer spending.

Most economists expected the combination of weaker inventory growth and tepid consumer spending to lead to slower growth in the current January-March quarter. Many are predicting 2 percent annualized growth this quarter.