Weekly applications for unemployment aid dropped 27,000 to a seasonally adjusted 300,000, the Labor Department said Thursday. That's just above a seven-year low reached three weeks ago. The four-week average, a less volatile measure, fell to 311,500, the fewest since August, 2007.
Applications are a proxy for layoffs, so the drop suggests companies are cutting fewer jobs. When employers are confident enough to keep staff, they may also step up hiring. That is a good sign ahead of May's jobs report, to be released next Friday.
The downward trend in layoffs also suggests employers have shrugged off a dismal economic performance in the first three months of the year. A separate government report Thursday showed that the economy shrank 1 percent at an annual rate in the first quarter, due largely to the impact of freezing winter weather.
Yet applications for unemployment benefits have fallen 10 percent since the year began, a clear signal that employers aren't worried about a longer-term slowdown. Many economists expect growth will rebound to a 3.8 percent pace in the second quarter.
"The data remain extremely encouraging," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said in a research note. The report "suggests that the pick-up (in hiring) is continuing," he added.
Fewer Americans are also receiving benefits. The number of recipients declined to 2.63 million, the lowest level since November 2007.
The decline in applications since the start of the year has been accompanied by greater job gains, though unemployment remains at historically high levels.
The economy gained 288,000 jobs in April, the most in 2 1/2 years, and the unemployment rate plunged to 6.3 percent from 6.7 percent. But the drop occurred because fewer people looked for work. The government doesn't count people as unemployed unless they are actively searching.
In the first four months of this year, employers have added an average of 214,000 jobs a month, up from 194,000 last year.
The improved hiring may help boost economic growth for the rest of 2014. More jobs mean more people have paychecks to spend.
The economy shrank in the first quarter as businesses cut back on spending and the cold weather kept consumers away from shopping malls, car dealer lots and open houses.