Applications fell 50,000, the biggest drop in the seasonally adjusted figure in more than six years, the Labor Department said Thursday. The four-week average, which smooths out fluctuations, dropped to 379,000. That's the second-lowest such figure in more than three years.
A department spokesman cautioned that volatility at this time of year is common. Applications had jumped two weeks ago, largely because companies laid off thousands of temporary workers hired for the holidays.
Still, when weekly applications fall consistently below 375,000, it usually signals that hiring is strong enough to push down the unemployment rate.
"This continues a clear downshift in claims," said Ian Shepherdson, an economist at High Frequency Economics.
Shepherdson suggested that stronger hiring should follow.
Hiring improved in the second half of 2011. In December, employers added 200,000 jobs. That marked the sixth straight month in which the economy added at least 100,000 jobs. And the unemployment rate fell to 8.5 percent, a three-year low.
For all of 2011, the economy added 1.6 million jobs. That was up sharply from 940,000 in 2010. Economists say they expect roughly 1.9 million more jobs to be added this year, according to a survey by The Associated Press.
Still, the job market has a long way to go before it fully recovers from the damage of the Great Recession, which wiped out 8.7 million jobs. More than 13 million people remain unemployed. Millions more have given up looking for work and so are no longer counted as unemployed.
The overall number of people receiving benefits, which isn't seasonally adjusted, rose. More than 7.8 million people received benefits in the final week of last year. They include about 3.6 million people covered by extended-benefit programs begun during the recession.
The manufacturing sector remains a bright spot. Factory output jumped 0.9 percent in December, the Federal Reserve said this week. That was the sharpest monthly gain in a year. Manufacturing gained 225,000 jobs last year, the most since 1997.
The pickup in hiring reflects stronger economic growth. The economy likely grew at an annual rate of about 3 percent in the final three months of last year, economists estimate.
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 wages aren't keeping up with inflation. The department said in a separate report that average inflation-adjusted hourly earnings dropped 0.9 percent last year.
Without more jobs and higher pay, consumers might have to cut back on spending. That would weigh down growth next year. Consumer spending accounts for about 70 percent of the economy.