Unemployment drops sharply, Labor Department says

The number of people seeking unemployment benefits fell last week by the most in nearly a year. The figure was a hopeful sign that hiring could pick up in coming months.

The Labor Department said Thursday that weekly unemployment benefit applications fell 27,000 last week to a seasonally adjusted 365,000.

Applications are a measure of the pace of layoffs. When they fall below 375,000, it generally suggests that hiring will be strong enough to lower the unemployment rate.

Last month, applications jumped after steadily declining since the fall. At the same time, hiring slowed. Those figures sparked concerns that the job market was worsening after strong gains during the winter.

But some economists said temporary layoffs stemming from spring holidays might have inflated benefit applications. Some school employees, such as bus drivers and cafeteria workers, are temporarily laid off at that time and can apply for benefits.

Last week's drop reversed the increase during April. Applications are now roughly back at their level four weeks ago.

"These data are consistent with the notion that while the labor market is not as robust as December-February data suggested, neither is it in the process of falling apart," said Joshua Shapiro, an economist at MFR Inc., in a note to clients.

Other recent data have been mixed. A survey by payroll provider ADP, released Wednesday, said businesses sharply cut back on hiring in April.

A report earlier this week showed that the economy's manufacturing sector expanded at the fastest pace in 10 months. Measures of new orders, production and exports rose. And a gauge of employment reached its highest level in 10 months.

On Friday, analysts expect the government to report that employers added 163,000 jobs in April, while the unemployment rate was unchanged at 8.2 percent. That would be an improvement from March, when job growth slowed to just 120,000. But it would be below the average of 246,000 jobs a month added from December through February.

Thursday's report on unemployment applications will have no direct effect on Friday's report on hiring in April. The government calculates job creation by surveying companies during one week in the middle of each month.

Unemployment applications during April's survey week were higher than in March's survey week. That suggests hiring last month might have been weaker than in March.

But the connection between the applications figures and job gains isn't always direct. And the drop in unemployment applications last week suggests that any slowdown may be temporary

Many economists downplayed the weak hiring in March. They said a mild winter led employers to accelerate hiring in January and February. That made March's job figures weaker.

ADP's report said companies added only 119,000 jobs last month. The ADP report has deviated sharply from the government's figures in the past and isn't always a reliable indicator. For example, the government's estimate of 120,000 jobs created in March was much lower than ADP's estimate of 201,000.

Most economists said the ADP figures would not lead them to change their forecasts for job creation during April.

The number of people receiving benefits also declined. In part, though, that's because some extended benefit programs are winding down. Nearly 6.6 million people received benefits during the week of April 14. That's down from about 6.7 million the previous week.

The unemployment rate has fallen to 8.2 percent in March from 9.1 percent in August. Part of the reason was that some people gave up looking for work. People who are out of work but not looking for jobs aren't counted among the unemployed.