Still, many private economists and Federal Reserve officials worry the nation could be in for a "jobless recovery" as the unemployment rate rises despite some overall economic growth.
The Labor Department said Thursday that first-time claims for jobless benefits dropped to a seasonally adjusted 502,000 from an upwardly revised 514,000 the previous week. That's the fewest claims since the week ending Jan. 3, and below economists' estimates.
The four-week average, which smooths fluctuations, dropped to 519,750, also the lowest in almost a year. It has fallen by more than 20 percent since its peak in the spring.
"The weekly claims figures are showing steady progress," said Zach Pandl, an economist at Nomura Securities. "Firing activity is starting to taper off. It's not clear whether hiring has picked up."
Economists closely watch initial claims as a gauge of the pace of layoffs. But claims also can provide a signal about the willingness of companies to hire, because laid-off workers able to find jobs are less likely to request benefits.
Abiel Reinhart, an economist at JPMorgan Chase, estimates that claims in the high 400s would be a signal the economy is starting to add jobs. That level could be reached by January, he said, and the economy should start gaining jobs in the first quarter of 2010.
Still, he doesn't expect the gains to be strong enough to push down the unemployment rate - now at a 26-year high of 10.2 percent - until the second quarter.
Pandl, meanwhile, said that claims will need to drop to about 425,000 before jobs are added. Still, he also expects the economy to see net gains in payrolls by January.
The last time the economy saw job gains was in December 2007, when employers added 120,000 jobs. Claims that month averaged about 340,000, though Reinhart said claims don't have to fall that far at the end of the recession to signal gains.
Many analysts estimate that job gains need to top 125,000 to account for population growth and lower the unemployment rate.
President Barack Obama called the better-than-expected jobless claims report "a hopeful sign," but said he'll host a White House summit next month on combating the joblessness that continues to drag on a struggling economy.
"We are open to any demonstrably good idea to supplement the steps we've already taken to put America back to work," Obama said before taking off for a trip to Asia. With millions of unemployed Americans, Obama said the government has "an obligation to consider every additional responsible step we can" to get people back to work.
The December jobs "forum" will bring in public and private sector experts to talk about how to get the job-creation engine running again, Obama said.
The stock market dipped in midday trading. The Dow Jones industrial average fell about 50 points, while broader indexes also edged down.
Employers cut a net total of 190,000 jobs in October, the government said last month, bringing total losses in the recession to 7.3 million.
Several regional Fed bank presidents warned in speeches Tuesday that the unemployment rate is likely to remain high for several years.
The economy grew at a 3.5 percent annual rate in the July-September quarter after a record four straight quarterly drops. The disparity between the unemployment rate and economic growth figure has raised fears among many economists that the nation's economy could be in for a "jobless recovery."
The government also said Thursday that the number of people continuing to claim benefits dropped by 139,000 to 5.6 million, below analysts' estimates. The figures on continuing claims lag initial claims by a week.
But millions of unemployed Americans have used up the regular 26 weeks of benefits typically provided by states and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government. Congress added 14 to 20 weeks to the extended program last week, the fourth extension since the recession began and the longest total extension on record.
About 4.1 million people were receiving extended benefits in the week ended Oct. 24, little changed from the previous week.
More job cuts were announced this week by Adobe Systems Inc., the maker of Photoshop, Flash and Acrobat software products, and internet company AOL LLC, which will soon be spun off from parent Time Warner Inc.
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