The number of people filing for unemployment benefits fell last week to the lowest since May 2008, a sign that the waves of corporate layoffs that have defined the past few years are all but over.
“This is unexpectedly great news,” said Ian Shepherdson, an economist at High Frequency Economics.
It will take an additional step – robust hiring, not just the end of layoffs – to bring the 8.6 percent unemployment rate down significantly. Experts say that won’t happen until businesses are more confident about customer demand. And the European debt crisis could still cause damage here.
But the report on unemployment claims Thursday was the latest to suggest that the economy, two and a half slow years after the official end of the recession, may finally be picking up momentum.
The nation added 100,000 or more jobs every month from July through November, the first five-month streak since 2006. And the economy, which was barely growing when the year started, has picked up speed each quarter.
More small businesses plan to hire than at any time in three years, a trade group said this week. And another private-sector survey found more companies are planning to add workers than at any time since 2008. The number of people applying for unemployment benefits came in at 366,000, down from 385,000 the week before. That moves the figure closer to its pre-recession range of roughly 280,000 to 350,000.
The last time claims were so low, the nation was six months into the recession but didn’t know it yet. The unemployment rate was 5.4 percent – a level almost hard to imagine these days. Unemployment has been above 8 percent for almost three years.
Unemployment claims are a measure of the pace of layoffs, and they have declined steadily for three months. But that’s just part of the picture. Businesses aren’t hiring with gusto. Unemployment fell 0.4 percentage points last month, but about half the decline was because people gave up looking for work and were no longer counted as unemployed.
“One of the features of this recovery is that hiring is exceptionally weak,” said Jeremy Lawson, senior U.S. economist at BNP Paribas.
And weaker-than-usual hiring doesn’t necessarily show up in unemployment claims. Many employers cut staffs to the bone during the recession. If they worry that business will grow weakly next year, they may hold off on layoffs – but not hire, either.
“The hiring numbers will continue to look good but not great,” said Nariman Behravesh, chief economist at IHS Global Insight.
Besides waiting for demand to come back, companies have other things to worry about. A recession in Europe would hurt U.S. exports, and a collapse in European banks because of the debt crisis there would probably cause a worldwide panic.