First-time applications for unemployment benefits fell 4,000 to a seasonally adjusted 364,000, the Labor Department said Thursday. It was the third straight weekly drop.
The four-week moving average, a less volatile gauge, fell for the 11th time in 13 weeks. At 380,250, it's the lowest since June 2008. Applications generally must fall below 375,000 - consistently - before hiring is strong enough to reduce the unemployment rate.
Unemployment applications are a measure of the pace of layoffs. Job cuts have fallen sharply since the recession, though many employers remain slow to start hiring.
The declining number of applications suggests that the economy may finally be regaining strength, 2½ years after the Great Recession ended. The nation added at least 100,000 jobs every month from July through November, the first five-month streak since 2006.
"When you fire fewer people, hiring unquestionably follows," said Dan Greenhaus, chief global strategist at BTIG LLC.
If unemployment applications continue declining, Greenhaus said, the number of jobs created each month will rise to 200,000 and the unemployment rate might fall as low as 8 percent before November's elections.
In the past three months, employers have added an average of 143,000 net jobs a month. That compares with an average of 84,000 in the previous three months.
More small businesses plan to hire than at any time in three years, a trade group said last week. A separate private-sector survey found more companies are planning to add workers than at any time since 2008.
Overall economic growth appears to be tracking the job market's improvement. The economy was barely growing when the year started. In the final quarter, growth might exceed 3 percent, up from 2 percent in the July-September period.
Still, applications for unemployment benefits are above the level needed to lower the unemployment rate significantly. The four-week moving average for new claims has exceeded that number since June 2008. Unemployment has been above 8 percent for almost three years.
Before the recession, there generally were 280,000 to 350,000 new applications for unemployment benefits each week. The number peaked at 659,000 in March 2009.
The unemployment rate fell in November to 8.6 percent from 9 percent, but about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they're no longer counted as unemployed.
And weak hiring doesn't always appear in unemployment claims data. Employers slashed payrolls deeply during the recession. If they're worried about the slow pace of recovery, they may hold off layoffs - but not hire, either.
The figures come as Congress appears close to going home without extending emergency unemployment benefits, which are set to expire at the end of the year.
About 6.7 million people are receiving unemployment benefits. About 2.2 million of them will lose their benefits by mid-February and 3.6 million others will lose theirs by the end of March if Congress doesn't extend the emergency benefits.
Lawmakers are deadlocked over continuing the program, which is attached to legislation that would extend a Social Security tax cut.
House Republicans rejected a two-month extension passed by a bipartisan majority in the Senate. President Barack Obama has called on lawmakers to approve the short-term measure so that they will have time to negotiate a full-year extension.
If Congress doesn't renew the two measures for 2012, economists say, the economy's growth could slow by as much as 1 percentage point.