(Mark Lennihan ~ Associated Press)
The number of people filing for unemployment benefits fell last week to the lowest since May 2008, a sign that the waves of corporate layoffs that have defined the past few years are all but over.
"This is unexpectedly great news," said Ian Shepherdson, an economist at High Frequency Economics.
It will take an additional step -- robust hiring, not just the end of layoffs -- to bring the 8.6 percent unemployment rate down significantly. Experts say that won't happen until businesses are more confident about customer demand. And the European debt crisis could still cause damage here.
But the report on unemployment claims Thursday was the latest to suggest that the economy, two and a half slow years after the official end of the recession, may finally be picking up momentum.
The nation added 100,000 or more jobs every month from July through November, the first five-month streak since 2006. And the economy, which was barely growing when the year started, has picked up speed each quarter.
More small businesses plan to hire than at any time in three years, a trade group said this week. And another private-sector survey found more companies are planning to add workers than at any time since 2008.
The number of people applying for unemployment benefits came in at 366,000, down from 385,000 the week before. That moves the figure closer to its prerecession range of roughly 280,000 to 350,000.
The last time claims were so low, the nation was six months into the recession but didn't know it yet. The unemployment rate was 5.4 percent. Unemployment has been above 8 percent for almost three years.
That spring of 2008, Bear Stearns, an investment house that predated the Depression, had been hobbled by its investment in subprime mortgages and was sold near collapse to JPMorgan Chase for a paltry $10 a share.
The worst was yet to come. Lehman Brothers collapsed that September. Credit froze, investors panicked and the stock market plunged. Businesses began slashing millions of jobs. Unemployment claims peaked at 659,000 in March 2009.
Unemployment claims are a measure of the pace of layoffs, and they have declined steadily for three months.
But that's just part of the picture. Business aren't hiring with gusto. Unemployment fell 0.4 percentage points last month, but about half the decline was because people gave up looking for work and were no longer counted as unemployed.
"One of the features of this recovery is that hiring is exceptionally weak," said Jeremy Lawson, senior U.S. economist at BNP Paribas.
And weaker-than-usual hiring doesn't necessarily show up in unemployment claims. Many employers cut staffs to the bone during the recession. If they worry that business will grow weakly next year, they may hold off on layoffs -- but not hire, either.
"The hiring numbers will continue to look good but not great," said Nariman Behravesh, chief economist at IHS Global Insight.
Besides waiting for demand to come back, companies have other things to worry about. A recession in Europe would hurt U.S. exports, and a collapse in European banks because of the debt crisis there would probably cause a worldwide panic.
Another concern: The economy has been here before.
In February, unemployment claims fell to 375,000. Companies added about 200,000 jobs a month for three months. But then oil prices spiked and Europe's debt problem got worse. Employers added just 53,000 jobs in May.
The decline in unemployment claims comes as Congress wrangles over whether to extend long-term unemployment benefits, which are set to expire at the end of this year.
Lawmakers differ over how long benefits should last. The House passed a Republican bill Tuesday that would renew emergency aid but reduce the maximum duration to 79 weeks from 99.
Democrats want to keep the full 99 weeks. The measure is part of broader legislation in the Democratic-led Senate that would also extend a cut in the Social Security tax and put $1,000 to $2,000 in most Americans' pockets next year.
In other economic news Thursday:
-- The prices companies pay for factory and farm goods rose 0.3 percent last month. The figure was pushed up by higher food and pharmaceutical prices. But energy prices barely rose, keeping inflation in check. In the year ending in November, wholesale prices increased 5.7 percent, the Labor Department said. It's the smallest increase since March.
-- A mixed picture emerged for manufacturing. Factory output fell in November for the first time in seven months, according to the Federal Reserve. Manufacturers made fewer cars, electronics and appliances. But some economists noted that auto sales rose in November, suggesting that production will rebound. And the Federal Reserve Banks of Philadelphia and New York said manufacturing expanded in their regions. Manufacturing has been a key source of economic growth this year.