07/23/2015 08:40 EDT | Updated 07/23/2016 05:59 EDT

Number Of Americans Seeking Unemployment Aid At 42-Year Low

WASHINGTON - The number of people seeking U.S. unemployment aid plunged last week to the lowest level in nearly 42 years, evidence that employers are holding onto their staffs and likely hiring at a steady pace. Yet the drop also reflects seasonal volatility in the data.

Weekly applications for unemployment benefits fell 26,000 to 255,000, the lowest level since November 1973, the Labor Department said Thursday. If the data were adjusted for the growth of the U.S. population since then, last week's figure would likely be an all-time low.

The four-week average, a less volatile number, fell 4,000 to 278,500.

One reason for the drop, however, is that auto plants and other factories close briefly in July to prepare for next year's models. That pushed up applications in the previous two weeks. Now that many factories have reopened, applications have fallen back.

"We should always take this summer period for claims with a grain of salt," said Jennifer Lee, an economist at BMO Capital Markets. "From a long-term perspective, we're still looking at claims bobbing around at the lowest level in ages."

Applications are a proxy for layoffs, so the drop means companies are cutting few jobs. Applications have been below 300,000, historically a very low level, since March.

"Employers are holding tightly onto their staff," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "This is the flipside of the difficulty they report in finding qualified people."

With layoffs down, employers are also hiring more to meet greater demand for their goods and services. The economy added 223,000 jobs in June, and the unemployment rate fell to a seven-year low of 5.3 per cent.

The economy has gained nearly 3 million jobs in the past year. With that many more people earning paychecks, economists forecast that spending should pick up and help fuel growth for the rest of this year.

Even so, there are some signs of ongoing weakness in the job market.

The unemployment rate fell in June mostly because many of the unemployed stopped looking for work, rather than found jobs. The proportion of Americans working or looking for work fell to a 38-year low.

And average hourly pay was unchanged last month from May. Pay has risen at roughly a 2 per cent annual pace since the recession ended in 2009, below the 3.5 per cent typical in a healthy economy.

That sluggish wage growth is likely keeping spending from increasing as much as the healthy job growth would suggest. Sales at retailers and restaurants fell last month, the government said earlier this month.

Yet home sales have picked up, and Americans are buying more cars. Sales of existing homes jumped in June to an eight-year high.

Analysts expect the economy will expand at about a 2.5 per cent annual rate in the second quarter, after contracting 0.2 per cent in the first three months of the year.

Also on HuffPost:

  • 10. Minneapolis, Minnesota
    10. Minneapolis, Minnesota
    ZipRecruiter score: 0.76
    Unemployment rate: 3.00

    Which industries are hiring: Professional services, health care, tech and food manufacturing are all local industries expected to hire in 2015.
  • 9. Boulder, Colorado
    9. Boulder, Colorado
    Scott Leigh via Getty Images
    ZipRecruiter score: 0.75
    Unemployment rate: 3.20

    Which industries are hiring: Small and medium-sized businesses in the sectors of education, government, tech and manufacturing will be the key drivers of employment in Boulder.
  • 8. Fort Collins, Colorado
    8. Fort Collins, Colorado
    Marek Uliasz via Getty Images
    ZipRecruiter score: 0.69
    Unemployment rate: 3.20

    Which industries are hiring: Job seekers in the fields of education, tech and manufacturing will have the best luck finding a job in Fort Collins, Northern Colorado's economic hub, according to ZipRecruiter.
  • 7. Omaha, Nebraska
    7. Omaha, Nebraska
    Jupiterimages via Getty Images
    ZipRecruiter score: 0.66
    Unemployment rate: 3.0

    Which industries are hiring: Home to Warren Buffett, the financial services industry, as well as the health care and tech industries will provide job growth in Omaha, according to ZipRecruiter.
  • 6. Provo, Utah
    6. Provo, Utah
    Denis Jr. Tangney
    ZipRecruiter score: 0.61
    Unemployment rate: 3.0

    Which industries are hiring: Home to Brigham Young University, the fields of education, tech and health care are all experiencing healthy growth, according to ZipRecruiter.
  • 5. Odessa, Texas
    5. Odessa, Texas
    ZipRecruiter score: 0.49
    Unemployment rate: 2.8

    Which industries are hiring: Led by a thriving oil industry, energy services and construction lead job creation in Odessa, according to ZipRecruiter.
  • 4. Sioux Falls, South Dakota
    4. Sioux Falls, South Dakota
    inkknife_2000 (2.5 million + views)/Flickr
    ZipRecruiter score: 0.39
    Unemployment rate: 2.7

    Which industries are hiring: Sioux Falls boasts a diversified and fast-growing economy, providing job growth in the fields of mail-order pharmaceuticals, medical device manufacturing and information assurance, according to ZipRecruiter.
  • 3. Rochester, Minnesota
    3. Rochester, Minnesota
    Andy445 via Getty Images
    ZipRecruiter score: 0.32
    Unemployment rate: 2.6

    Which industries are hiring: Rochester, home to the world-renowned Mayo Clinic, is a major center of health care hiring. A new project by the clinic is also expected to bring thousands of construction jobs, according to ZipRecruiter.
  • 2. Fargo, North Dakota
    2. Fargo, North Dakota
    Davoud Davies via Getty Images
    ZipRecruiter score: 0.11
    Unemployment rate: 2.2

    Which industries are hiring: Thanks to booming population growth over the last decade, education and health care are the main drivers of job growth in Fargo.
  • 1. Lincoln, Nebraska
    1. Lincoln, Nebraska
    Jupiterimages via Getty Images
    ZipRecruiter score: 0.07
    Unemployment rate: 2.1

    Which industries are hiring: Lincoln is first in the nation in job growth for construction, financial services, state government, manufacturing and health care, according to a study by the University of Nebraska.