WASHINGTON (AP) - The number of people applying for unemployment benefits fell sharply last week to the lowest level since July 2008, a hopeful sign that improvement in the job market is accelerating.
The Labor Department said Wednesday that weekly unemployment claims dropped by 34,000 to a seasonally adjusted 407,000 in the week ending Nov. 20. Wall Street analysts expected a much smaller drop.
A Labor Department analyst said the claims figures are volatile during the week between the Veteran's Day and Thanksgiving holidays. A key question is whether claims will remain this low in future weeks, or bounce back.
Still, applications for jobless aid are steadily moving lower. Claims have fallen in four of the past six weeks.
The four-week average, a less volatile measure, dropped for the third straight week to 436,000, the lowest since August 2008. That's a month before the financial crisis intensified with the collapse of Lehman Brothers, worsening the recession.
"Although weekly claims readings can be volatile, the downward trend over the past three months is too significant to be ignored," Ryan Wang, an economist at HSBC Securities, said.
The stock market responded positively to the jobless claims report and other economic data. The Dow Jones industrial average jumped by 130 points in morning trading, while broader indexes also rose.
The improvement can't come fast enough for frustrated jobseekers. Applications for jobless aid need to stay below 425,000 for several weeks to signal that hiring is accelerating, economists say.
For the first 10 months of this year, claims mostly fluctuated around 450,000 until they began dropping in late October. They fell steadily last year from a peak of 651,000 in March 2009.
Applications for unemployment benefits, while volatile, are a real-time snapshot of the job market. They are a measure of the level of layoffs and indicate whether companies are hiring.
Strong job gains have been slow to materialize this year, even as the economy grows at a modest pace. Earlier this month, the Labor Department said private employers added a net total of 159,000 jobs in October, the most in six months.
Still, the unemployment rate remained stuck at 9.6 percent for the third straight month. And the economy needs to generate roughly twice that many jobs per month to rapidly reduce unemployment.
But the economy isn't expanding quickly enough to generate large numbers of jobs. The Commerce Department said Tuesday that the economy grew at a 2.5 percent annual pace in the July-September period. That's weak compared to previous recoveries from steep recessions.
The Federal Reserve said Tuesday that it doesn't expect the economy to expand much faster anytime soon. It forecasts the economy will grow by 3 percent to 3.6 percent next year, and unemployment will still be between 8.9 percent and 9.1 percent by the end of 2011.
The number of people continuing to claim unemployment aid, meanwhile, fell by 142,000 to 4.18 million, the lowest in two years.
That doesn't include millions of people receiving extended benefits under an emergency program set up by Congress during the recession. Nearly 4.7 million people received extended benefits during the week ending Nov. 6, the latest data available. That's down by more than 260,000 from the previous week.
Copyright 2010 The Associated Press.