Paul Sakuma  /  AP
In this photo taken Tuesday, Feb. 1, 2011, job seeker Rolando Cunanan leaves the Day Worker Center of Mountain View without work in Mountain View, Calif. The number of people applying for unemployment benefits plunged last week to the lowest level in nearly three years.
msnbc.com news services
updated 2/10/2011 10:24:38 AM ET 2011-02-10T15:24:38

The number of people applying for unemployment benefits plunged last week to the lowest level in nearly three years, boosting hopes that companies will step up hiring this year as the economy strengthens.

Applications sank by a seasonally adjusted 36,000 to 383,000, the lowest point since early July 2008. A Labor Department official said claims were still unwinding some of the weather effects that pushed up applications last month.

Unemployment applications reflect the level of layoffs, but also can indicate whether companies are willing to hire.

"The sharp drop bodes well for February job creation," said economist Ellen Beeson Zentner at Bank of Tokyo-Mitsubishi UFJ.

  1. More must-see stories
    1. The Hartford Courant, Political
      Wild Wall St.

      Has the market volatility got you nervous? These cartoons may give you a little comic relief.

    2. Cyber-thieves create fake Kelley Blue Book site
    3. US says Reebok toning shoes don't really
    4. Can you live on $9 an hour? Play the game
 

Applications below 425,000 tend to signal modest job growth. But they would need to dip consistently to 375,000 or below to indicate a significant and steady decline in the unemployment rate.

The data, coming on the heels of Friday's report showing the economy created a paltry 36,000 jobs in January, added to other employment indicators that have pointed to a gain in momentum in the labor market, however.

Story: Fed chief says inflation not a threat to U.S.

Economists also cautioned not to read too much into the weekly claims data, however, which are still unwinding some of the distortions related to the wintry weather. But they remained optimistic about the general trend toward a gradually improving job market.

"While it is true that claims should be below the 400k-level given improvements in the jobs market, the fact that it had suffered from unanticipated weather distortions -- and will continue in the near term to do so -- means that today's improvement could be mitigated by a couple 'correctional shifts.' The level however will start to consistently fall below 380K in the spring," said Vimombi Nshom of IFR Economics.

The four-week moving average of unemployment claims -- a better measure of underlying trends - dropped 16,000 to 415,500 last week.

The number of people still receiving benefits under regular state programs after an initial week of aid declined 47,000 to 3.89 million in the week ended January 29 from an upwardly revised 3.94 million the prior week.

Major Market Indices

Economists had expected so-called continuing claims to fall to 3.90 million from a previously reported 3.93 million.

The number of people on emergency unemployment benefits increased 100,366 to 3.76 million in the week ended January 22, the latest week for which data is available. A total of 9.4 million people were claiming unemployment benefits during that period under all programs.

In addition, businesses at the wholesale level added to their inventories in December at a healthy clip even though demand for their products slowed. The expectation is that rising demand from businesses will keep factories humming.

Wholesale businesses boosted inventories 1 percent in December, pushing the total to $430.5 billion, the Commerce Department reported Thursday. Economists consider that a healthy level for inventories. It is 11.4 percent above the low reached in September 2009 when companies were slashing their stockpiles in response to a deep recession.

Sales at the wholesale level rose 0.4 percent in December, a smaller than expected increase and the poorest showing since last July. However, the December advance followed a strong 1.9 percent rise in November.

The Associated Press and Reuters contributed to this report.

Video: Weekly jobless claims drop, lowest since '08

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.71%
$30K home equity loan FICO 5.26%
$75K home equity loan FICO 4.70%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.42%
13.42%
Cash Back Cards 17.94%
17.94%
Rewards Cards 17.14%
17.14%
Source: Bankrate.com