WASHINGTON — The outlook for the US job market is brightening after a government report showed a sharp drop in the number of Americans applying for unemployment benefits.
Weekly applications fell 27,000 to a seasonally adjusted 341,000, the Labor Department said Thursday. Except for a few weeks last month affected by seasonal distortions, that was the lowest level in nearly five years.
The four-week average, which smooths out week-to-week fluctuations, stayed near a five-year low.
Economists were encouraged but want to see the progress sustained and more jobs created. Since the recession ended in June 2009, the job market has shown bursts of improvement in winter months, only to falter in the spring.
And the huge snowstorm that affected the Northeast over the weekend could push up applications in coming weeks. The latest report covered the week ended Feb. 9, prior to when the storm hit.
Falling applications signal fewer layoffs. More hiring usually follows.
Since November, the four-week average has declined 5 percent to 352,500 applications. Job growth has increased to an average of 200,000 net positions a month from November through January, up from 150,000 in the previous three months.
But the employment report measures net job gains, which equals total hiring minus layoffs, quits, and other separations.
A decline in layoffs can boost net job gains even when total hiring is flat or down. A separate Labor Department report this week showed that layoffs fell to a 10-year low in December. Overall hiring, however, also declined.
Many companies may be more cautious about hiring now that a 2 percentage point increase in Social Security taxes is cutting consumers’ take-home pay. That could slow growth.
Still, if applications remain consistently below 350,000, net job growth should increase, said Carl Riccadonna, an economist at Deutsche Bank. Monthly gains could rise to an average of 225,000 per month, he added.
Gains at that level should steadily lower the still-high unemployment rate, which ticked up to 7.9 percent in January from 7.8 percent in December.
More than 5.9 million people received benefits in the week ended Jan. 26. That was about 325,000 more than the previous week.