Three years after the onset of the Great Recession, signs are mounting that employers might at last be starting to hire new workers.
The Labor Department reported Thursday that new claims for unemployment benefits unexpectedly dropped below 400,000 last week for the first time since mid-2008, and economists called it a hopeful sign that the jobless rate, stuck near 10% for more than a year, might soon begin to fall.
The weather and the holiday period may have exaggerated the improvement in what can be volatile numbers. And given the disappointing job-growth numbers for November and other economic risks such as the depressed housing market, analysts remained cautious about reading too much into the data.
But the sharp drop in initial jobless claims — considered a signal of future economic trends — was consistent with other reports suggesting a steady if slow healing of the labor market. Surveys by business groups and other recent economic statistics such as retail sales and manufacturing activity, plus the expected stimulus from this month's tax-cut deal, point to a stronger recovery ahead. That bodes well for hiring in the coming months.
"This is certainly a great sign that we end the year with a bang, finally breaking this 400,000 barrier," said John Challenger, chief executive at the outplacement consulting firm Challenger, Gray & Christmas. "It doesn't mean clear sailing from here, but it does mean another notch in the jobs recovery."
The latest numbers, for the week ended Dec. 25, showed 388,000 new filings for unemployment benefits on a seasonally adjusted basis. That's down from 422,000 claimants in the previous week and from more than 500,000 in mid-August.
Most analysts were expecting a decline of just a few thousand from the week before.
"It's encouraging," said Wayne Vroman, a senior fellow at the Urban Institute who specializes in employment issues. He attributed the drop to a pick-up in hiring but also to fewer people qualifying for benefits. To be eligible, workers typically need to have earned a certain amount in the 12 months before unemployment, he said. But the job market has been so weak for so long that many have earned little or nothing at all.
Thursday's report showed that nearly 9 million workers were drawing unemployment checks this month, the majority of whom have been without work for more than six months and are receiving extended benefits from federal funds.
Various private and government reports indicate that layoffs have clearly subsided. But employers generally have not stepped up their hiring, despite many of them making strong profits and sitting on mountains of cash. Over the past 12 months, the economy has added about a million jobs, a pace so slow that it can't even keep pace with new workers entering the job market.
In November employers added a mere 39,000 jobs, which helped push the jobless rate up to 9.8%.
"It doesn't matter that layoffs are going down; just remember the huge glut of people out there," said Harrison Kyle Jones, president of Forty Plus of New York, a job networking and support group for professionals.
Still, Jones says he sees some industries beginning to pick up their hiring, including the banking and insurance sectors. And even the number of people his group is now helping is down about one-fourth from a year ago.
Kate Eckhoff, of Columbus, Ohio, also sees the job market changing for the better. The 27-year-old has been looking for work since she graduated from Ohio State University in August 2009 with a degree in international studies. Recently she has had promising leads with an advertising firm and a global company involved in the auto industry.
"I'm really optimistic about the interviews I'll have next month," she said Thursday.
Ohio's unemployment rate in November was right at the national average of 9.8%, having fallen a full percentage point from a year ago. But such large states as California and Florida that took a bit hit from the housing bust have seen no improvement in joblessness over the last year, and several others, including Nevada and Michigan, are also still grappling with double-digit unemployment.
Thursday's report indicated that fewer layoffs in agriculture reduced California's new jobless claims last week, while a few states, including Illinois, Georgia and Pennsylvania, reported smaller cutbacks in construction and service industries.
Manufacturing has held up well during the recovery, thanks largely to stronger demand from overseas markets and domestic businesses ramping up investments in new equipment, sometimes in lieu of adding new staff.