Weekly applications dropped by 15,000 to a seasonally adjusted 372,000 last week, the Labor Department said. That's 11 per cent lower than the same time last year and a positive sign ahead of Friday's important read on December job growth.
The four-week average, which smooths fluctuations, fell to 373,250 — the lowest level since June 2008.
When applications drop below 375,000 — consistently — they generally signal that hiring is strong enough to reduce the unemployment rate.
Hiring strengthened at the end of last year and economists expect it will pick up even further this year.
Economists surveyed by the Associated Press project that the economy will generate an average of 175,000 jobs per month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.
On Friday, the Labor Department reports on hiring in December. Economists predict that employers added 150,000 net jobs, which would be an improvement from November's gain of 120,000.
In November, the unemployment rate fell to 8.6 per cent from 9 per cent. Still, about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they're no longer counted as unemployed.
Another positive sign for hiring came earlier this week. A trade group reported that manufacturers boosted hiring last month as production and new orders rose to their highest levels since April.
The pickup in hiring reflects some modest improvement in the economy. Growth will likely top 3 per cent at an annual rate in the final three months of this year, economists expect. That would be a sharp improvement over the 1.8 per cent growth in the July-September quarter.
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 without more jobs and higher incomes, consumers may have to cut back on spending. That could drag on growth next year.