Paul Sakuma / AP
Job applicants wait in a long line at a job fair in San Jose, Calif. Jobless claims dropped to a seven-month low in the latest week, a sign that hiring may be picking up.
New claims for unemployment insurance dropped to their lowest level in seven months, government data showed on Thursday, raising hopes that hiring may be picking up.
The Labor Department said seasonally adjusted initial claims dropped 5,000 to 388,000, versus the previous week's revised 393,000 figure. The 4-week moving average, widely considered a more accurate measure of labor market trends, was 396,750, a drop of 4,000 from the previous week's revised average of 400,750.
"The U.S. economy continues to show signs of strong momentum. The improvement in claims underscores that the gains in labor market activity over the past few months are being sustained," said Millan Mulraine, a senior macro strategist at TD Securities in New York.
Applications need to consistently drop below 375,000 to signal sustained job gains. They haven't been that low since February.
The total number of people receiving benefits also fell to the lowest level since September 2008, when Lehman Brothers collapsed and the financial crisis intensified.
After wobbling in the second quarter, the labor market is regaining momentum, but not enough to cut into a 9 percent unemployment rate and promote faster economic growth. The unexpected decline in claims last week was the latest sign that the economy maintained speed in the fourth quarter, further reducing the risk of a new recession.
But the crisis in Europe, which has caused bond market turmoil across the region, could derail the recovery.
A Labor Department official described the report as straightforward.
The jobless claims data were the latest in a string of reports showing the U.S. economy gaining some momentum of late. Factories are running at a faster pace and inflation is almost nonexistent.
Factories made more cars, electronics and business equipment in October, a sign that manufacturing is recovering after slowing this spring.
Industrial production rebounded 0.7 percent last month, the Federal Reserve said on Wednesday, after slipping 0.1 percent in September. October's increase was the largest since July.
The Labor Department said Wednesday that consumer prices dropped 0.1 percent last month, which was roughly in line with expectations, as Americans paid less for new cars and gasoline. The data reinforce the view that inflation is poised to trend lower following a spike in oil prices earlier in the year.
The low inflation also gives the Federal Reserve room to move if the economy begins to stall again. Europe is the dark cloud looming on the U.S. economic horizon. The eurozone's growing debt crisis threatens to throw the global economy into recession if European leaders don't act swiftly to contain the damage.
The Associated Press and Reuters contributed to this report.
The recent economic data shows an improvement in the economy since mid-Summer, says James Bullard, St. Louis Fed president.