Drop in unemployment claims points to stronger job gains

WASHINGTON — The job market is looking a little brighter in the new year.


Weekly unemployment benefit applications have fallen to levels last seen more than three years ago. Holiday sales were solid. Service companies grew a little faster in December. And many small businesses say they plan to add jobs.

The mix of private and government data released Thursday sketched a picture of an economy that is slowly strengthening, stoking optimism one day ahead of the government’s important read on December job growth.

“Businesses have increased hiring to meet the underlying pick-up in (consumer) demand,” said Neil Dutta, an economist at Bank of America Merrill Lynch.

The encouraging reports on the U.S. economy gave Wall Street a late-day lift, offsetting renewed concerns over Europe’s debt crisis. The Dow Jones industrial average, which had fallen by 134 points at one point, closed down 3 points. Broader indexes posted modest gains.

Weekly applications for unemployment benefits dropped to a seasonally adjusted 372,000 last week, the Labor Department said Thursday, 11 percent lower than the same time last year.

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.