Jobless claims drop. Unemployment rate to follow?

Weekly applications for U.S. unemployment aid fell last week to a seasonally adjusted 369,000, a level consistent with modest hiring.

The Labor Department said Thursday that unemployment benefit applications dropped by 23,000, from a revised 392,000 the previous week. The four-week average, a less volatile measure, rose to 368,000.

The figures appear to have stabilized after being distorted in the previous two weeks by seasonal adjustment problems.

Applications are a proxy for layoffs. When they fall below 375,000, it suggests hiring is strong enough to lower the unemployment rate.

Applications have fluctuated between 360,000 and 390,000 since January. At the same time, employers have added an average of nearly 150,000 jobs a month. That's barely enough to lower the unemployment rate, which has declined from 8.3 percent to 7.8 percent this year.

Robert Kavcic, an economist at BMO Capital Markets, said jobless claims have struggled to fall below 360,000 this year.

"That barrier could be a good level to watch for an indication that the U.S. labor market is kicking into a higher gear, but we're just not seeing it yet," Kavcic said in a note to clients.

Employers are hesitant to add more workers as long as growth remains tepid and Europe's financial crisis threatens to push that region into recession. Many also are holding off because they are worried about tax increases and government spending cuts that would kick in next year if Congress doesn't reach a budget deal to avert them.

The weak job market has been a key topic in this year's presidential election, which is down to its final days. Voters will have one final employment report to consider, which comes out four days before Election Day.

The number of people continuing to receive unemployment aid fell to 4.9 million in the week ended Oct. 6, the latest data available. That's about 85,000 fewer than the previous week. Some of those no longer receiving benefits may have gotten jobs, but many have simply used up all the benefits available to them.

There have been some signs that the economy is improving.

The unemployment rate fell in September to 7.8 percent. That's the lowest level since January 2009 — President Barack Obama's first month in office. The rate fell because a government survey of households found a huge increase in the number of people who had jobs. Still, a jump in part-time employment accounted for most of the gain.

Retail sales grew in September at a healthy clip. And home sales and residential construction have shown steady improvement this year, helped by stable gains in home prices and the lowest mortgage rates in decades.

But the economy is not growing fast enough to generate much hiring. Growth slowed to a tepid annual rate of 1.3 percent in the April-June quarter, down from 2 percent in the previous quarter. Most economists see growth staying at or below 2 percent in the second half of the year. The Commerce Department will issue its first estimate of growth in the July-September quarter on Friday.