Unemployment claims drop to 5-year low

Christopher S. Rugaber, Associated Press | AP

WASHINGTON (AP) — The number of Americans seeking unemployment benefits fell last week to the lowest level in five years.

The Labor Department said Thursday that weekly unemployment benefit applications dropped 5,000 to a seasonally adjusted 330,000. That's the fewest since January 2008.

The four-week average, a less volatile measure, fell to 351,750. That's also the lowest in nearly five years.

The decline may reflect the government's difficulty adjusting its numbers to account for layoffs after the holiday shopping season. Layoffs typically spike the second week of January and then plummet. The department seeks to adjust for those trends, but the figures can still be volatile.

If the trend holds up, fewer applications would suggest the job market is improving.

Applications are a proxy for layoffs. They fluctuated between 360,000 and 390,000 most of last year. At the same time, employers added an average of 153,000 jobs a month. That's just been enough to slowly push down the unemployment rate, which fell 0.7 percentage points last year to 7.8%.

And there have been other positive signs for the economy and job market.

The once-battered housing sector is recovering, which is boosting construction and home prices. Home builders started work in 2012 on the most new homes in four years. And sales of previously occupied homes reached their highest level in five years last year. Still, home building and sales remain below the levels consistent with a healthy economy.

More home building will likely increase job growth. In December, the economy gained 30,000 construction jobs — the most in 15 months. And economists expect construction firms to add jobs this year as the housing recovery strengthens.

Patrick Newport, an economist at IHS Global Insight, forecasts that construction companies will add 140,000 jobs this year, up from a meager 18,000 in 2012.

The overall economy grew at an annual rate of 3.1% in the July-September quarter. But economists believe activity slowed considerably in the October-December quarter to a rate below 2% or less, in part because companies cut back on restocking.

Less restocking leads to slower factory production, which weighs on economic growth.