- Associated Press - Thursday, January 5, 2012

WASHINGTON (AP) — The number of people seeking unemployment benefits fell further last week, ending the year on a three-month run of declines that point to stronger hiring in 2012.

Weekly applications dropped by 15,000 to a seasonally adjusted 372,000 last week, the Labor Department said. That’s 11 percent lower than the similar time last year and a positive sign ahead of Friday’s important read on December job growth.

The four-week average, which smooths fluctuations, fell to 373,250 — the lowest level since June 2008.

When applications drop below 375,000 — consistently — they generally signal that hiring is strong enough to reduce the unemployment rate.

The downward trend in applications is one of several signs that show the economy ended the year with momentum. Retailers reported solid holiday sales, consumer confidence rose to the highest level since April, and November and December were the strongest months of 2011 for U.S. auto sales.

Unemployment benefit applications can be volatile around the end of the year.

Still, the overall trend is positive. Steven Wood, an economist at Insight Economics, said applications averaged 411,000 per week in 2011, down from 459,000 in 2010. That’s “a clear indication that the pace of layoffs has slowed,” Mr. Wood said.

Economists are predicting that hiring increased in December and will strengthen this year.

John Ryding, an economist at RDQ Economics, forecasts that employers added 180,000 jobs last month, a big jump from November’s 120,000 net jobs.

Economists surveyed by the Associated Press project that the economy will generate an average of 175,000 jobs per month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.

In November, the unemployment rate fell to 8.6 percent from 9 percent. Still, about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they no longer are counted as unemployed.

Another positive sign for hiring came earlier this week. A trade group reported that manufacturers boosted hiring last month as production and new orders rose to their highest levels since April.

The pickup in hiring reflects some modest improvement in the economy. Growth likely will top 3 percent at an annual rate in the final three months of this year, economists expect. That increase would be a sharp improvement over the 1.8 percent growth in the July-September quarter.

Even so, economists worry that growth could slow in the first half of 2012. Europe is almost certain to fall into recession because of its financial troubles. And without more jobs and higher incomes, consumers may have to cut back on spending. That cutback could drag on growth next year.

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