US jobless claims drop to lowest level in 2 years

Claims for jobless benefits dropped last week to the lowest level in two years, showing the US labour market is taking a turn for the better as the economy accelerates into 2011.

Applications for unemployment assistance decreased by 34,000 to 388,000 in the week ended December 25, breaking the 400,000 level for the first time since July 2008, according to Labor Department figures today in Washington. Other data showed businesses expanded this month at the fastest pace in two decades and pending home sales climbed in November for the fourth time in five months.

Firings may keep easing as a pickup in consumer spending prompts employers to retain staff, a necessary step toward increases in employment that will sustain demand. Gains in business investment and exports to growing emerging economies may keep factories churning out goods in the coming year, while more jobs may also help housing stabilise.

“The character of the recovery is a little more solid. Job growth will be stronger and that will help the consumer.” said John Silvia, chief economist at Wells Fargo Securities.