WASHINGTON – Economists are expecting a strong report on job growth in February, bolstered by news that fewer people sought unemployment benefits last week than in any week in nearly three years.
The sharp decline in applications for unemployment benefits, along with positive reports Thursday from retailers and the service industry, are the latest evidence that hiring will pick up this year.
Some analysts responded to the new data by raising their forecasts for how many jobs the economy created last month. The consensus is 175,000, but many economists are now estimating 200,000 or more, and they expect the pace to hold for the rest of the year. The government releases the February jobs report on Friday.
"All signs point to much stronger hiring," said Mark Zandi, chief economist at Moody's Analytics. "I think we finally have a prescription for a better job market."
A few economists are expecting the government to report that employers added as many as 300,000 jobs last month, although that's on the high end of forecasts.
January's figures were anemic — just 36,000 jobs added — partly because of severe winter storms that kept businesses closed. As much as a quarter of February's job gains could come from people returning to payrolls after the bad weather.
But most people pay more attention to the unemployment rate, which fell from 9.8 percent in November to 9 percent in January, the quickest decline in more than half a century.
Economists believe the rate edged up to 9.1 percent in February. Unemployment rates often rise when the economy improves and people who haven't been looking for jobs start hunting again. People who aren't looking are not counted as unemployed.
It would take up to 300,000 new jobs a month on a consistent basis to reduce the unemployment rate significantly, economists say. But few analysts — even those on the high end of February's forecast — think monthly job gains in the 300,000-plus range could be repeated month after month.
Companies have dramatically slowed the pace of layoffs. That's a major reason why economists are more optimistic that companies will hire more aggressively.
The number of people filing for unemployment benefits sank last week to its lowest point in nearly three years, the Labor Department reported on Thursday. Companies, enjoying growing sales and profits, are relying less on layoffs to cut costs, analysts said.
Applications for unemployment benefits plummeted to 368,000 last week. It was the third decline in the past four weeks. Applications are now at their lowest level since May 2008. Unemployment benefit applications peaked during the recession at 651,000.
The news helped give the stock market its best day in three months. The Dow Jones industrial average rose more than 190 points, or 1.6 percent, erasing most of its losses since the unrest in Libya began.
There's a big wild card for the economy — rising prices. Prices for food around the world are at their highest levels in 20 years, and gas prices have been rising for weeks, with the average for a gallon in the U.S. nearing $3.50.
For now, though, the economy is mostly flashing positive signs.
Americans appear more confident about spending money, which could convince businesses that the time is right to start hiring more workers. Stores representing shopping tastes across the income spectrum reported strong sales for February, including J.C. Penney, Macy's and Saks.
And the U.S. service sector, which employs about 90 percent of American workers in fields from health care to construction, is expanding at the fastest pace in more than five years, according to the Institute for Supply Management.
Productivity did rise in the final three months of last year. When workers are producing at a higher level, it makes it easier for businesses to hold off on hiring.
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