The number of people applying for U.S. unemployment benefits declined 20,000 last week to 331,000, suggesting that Americans are facing fewer layoffs and better job prospects.
The Labor Department said the four-week average, a less volatile measure, ticked up 250 to 334,000. That remains near pre-recession levels and serves as evidence that job losses have waned.
A total of 3.47 million Americans received benefits as of Jan. 18, down from 3.58 million the week before.
The January employment report being released Friday by the Labor Department will show whether hiring has improved. A scant 74,000 jobs were added in December, the fewest in three years. Most economists forecast that hiring will rebound in January to roughly match the monthly average of 185,000 jobs gained over the past two years.
The unemployment rate fell in December to 6.7 percent from 7 percent. But much of the decline was due to the departure of about 347,000 unemployed people who stopped looking for work. Once people without jobs stop looking for one, they're no longer counted as unemployed.
A private sector jobs report by ADP, a payroll processor, said Wednesday that companies added 175,000 jobs in January. The ADP numbers cover only private businesses and diverged sharply from the government's more comprehensive report in December.
ADP reported 227,000 new jobs in December, or 153,000 more than what the Labor Department did.
Separately, the unemployment rate could continue to fall in January because of a continued workforce exodus.
About 1.4 million fewer Americans are receiving unemployment benefits after a 5-year old emergency federal program expired Dec. 28. The program provided up to 47 extra weeks of unemployment aid paid for by the federal government after the jobless had exhausted their state benefits.
Recent economic reports have fueled concerns of a slowdown in the United States and other economies worldwide.
Stock markets have plummeted. U.S. manufacturing has experienced a slowdown, according to a private survey released Monday by the Institute for Supply Management. Turmoil in emerging economies such as China and Turkey and signs of slower growth in the United States have also raised doubts about whether the Federal Reserve will continue to pare down its monthly bond purchases.
Still, many economists have become more optimistic about the economy accelerating this year. Several are predicting a solid annual growth rate of 3 percent or more, the strongest performance since 2005.