WASHINGTON — The number of people requesting unemployment benefits last week plunged to a nearly three-year low, bolstering the likelihood that companies will increase the pace of hiring this year. The news came as a new report found that the U.S. service sector expanded in February at the fastest pace in more than five years.
The report index from the Institute for Supply Management , which covers about 90 percent of the work force, rose to 59.7 last month, from 59.4 in January. That’s the sixth straight monthly increase and the highest reading since August 2005. Any reading above 50 indicates expansion.
Applications for unemployment benefits fell by 20,000 to a seasonally adjusted 368,000, the Labor Department said Thursday. It was the third decline in the past four weeks. Applications are now at their lowest level since May 2008.
The four-week average for applications, a less volatile figure, fell last week to 388,500. That’s the lowest level since July 2008, the last time the four-week average was below 400,000.
Analysts are predicting strong job gains in the February employment report, which the government will release Friday. Brightening the outlook for more aggressive hiring, the service sector expanded at the fastest pace in more than five years in February, and the manufacturing sector grew last month at the fastest pace in nearly seven years. And retailers are reporting solid gains for February after the best holiday shopping season since 2006.
Stocks surged after the economic data was released. The Dow Jones industrial average rose by more than 180 points in morning trading.
“Often at this stage of the recovery, when these signals are in place, we see a surge in hiring,” said John Ryding, an economist with RDQ Economics.
Economists estimate that employers added a net 175,000 jobs in February. That would mark an improvement from an anemic 36,000 jobs in January when severe winter weather held back hiring.
The downward trend in applications for unemployment benefits suggests that companies are easing the pace of layoffs now that the economy is strengthening consistently. During the recession, companies slashed work forces, cut or froze workers’ pay and took other aggressive steps to reduce costs.
Stronger job creation is needed to steadily reduce unemployment. Economists say it would take up to 300,000 new jobs a month to reduce the unemployment rate significantly.
Thursday’s report also showed the number of people receiving unemployment benefits dropped to 3.77 million, the lowest level since mid-October 2008. That doesn’t include millions of people enrolled in emergency unemployment benefit programs funded by the federal government.
An additional 4.5 million unemployed workers received benefits under the extended programs during the week ending Feb. 12. Altogether, 9.2 million people were on the benefit rolls that week.
Service sector grows at fastest pace in 5 years
CHRISTOPHER S. RUGABER,AP Economics Writer
WASHINGTON (AP) — The U.S. service sector expanded in February at the fastest pace in more than five years and firms hired at the quickest rate since before the recession.
The report from the Institute for Supply Management offered the latest sign that job growth could accelerate this year.
The trade group’s service-sector index, which covers about 90 percent of the work force, rose to 59.7 last month, from 59.4 in January. That’s the sixth straight monthly increase and the highest reading since August 2005. Any reading above 50 indicates expansion.
The service sector is broadly defined by the trade group, covering a range of industries from retail to health care to financial services. The index plummeted to 37.6 in November 2008, at the height of the financial crisis.
Hiring by service-sector companies rose to the highest level since April 2006, a separate index in the report noted.
The report is “yet another indicator corrobating the idea that … current and future production levels necessitate the hiring of additional employees,” said Dan Greenhaus, chief economic strategist at Miller Tabak.
On Tuesday, the trade group said its index that tracks the manufacturing sector expanded in February at the fastest pace in nearly seven years. Both reports showed that businesses are paying higher prices for raw materials and other goods. That puts pressure on those companies to pass on the greater costs to consumers, or to accept lower profits.
Prices rose for gasoline, food and beverages, coffee, and fiber optic cables, the service-sector report said.
Other economic indicators released Thursday were also positive. The number of people applying for unemployment benefits dropped sharply last week, a sign that hiring is likely to accelerate this year.
Applications for unemployment benefits fell by 20,000 to a seasonally adjusted 368,000, the Labor Department reported Thursday. It was the third decline in the last four weeks. Applications are now at their lowest level since May 2008.