The number of Americans seeking unemployment benefits fell sharply last week to a seasonally adjusted 346,000, suggesting March’s weak month of hiring may have been a temporary slowdown.
Unemployment aid applications dropped by 42,000 last week, the Labor Department said Thursday. The steep decline reversed sharp gains over the previous two weeks and brought the level back to a point that signals stronger job growth.
The four-week average, a less volatile measure, rose 3,000 to 358,000.
The data have been volatile in the past two weeks largely because of the Easter holiday, a department spokesman said. The timing of the holiday changes from year to year. That makes it difficult to adjust for school holidays and other changes that can cause temporary layoffs.
Applications had jumped by 31,000 two weeks ago to 388,000, the highest level in four months.
“Last week’s spike appears to have been a false alarm,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, said in a note to clients. “The report should assuage some of the concerns raised by last week’s weaker-than-expected data, particularly payrolls.”
Employers added only 88,000 jobs in March, the government said last week. That followed four months in which job growth averaged 220,000. The drop in unemployment benefits could signal that more solid hiring will return in April.
The unemployment rate fell to a four-year low of 7.6 percent last month, down from 7.7 percent in February. However, the rate fell only because more people stopped looking for work and were no longer counted as unemployed.
Applications are a proxy for layoffs. The decline in applications signals that companies are laying off fewer workers.
Still, layoffs are only half of the equation. Businesses also need to be confident enough in the economic outlook to add more jobs.
Economists predict that economic growth accelerated in the January-March quarter to an annual rate of 3 percent. That would be a vast improvement from the rate of 0.4 percent in the October-December, which was held by steep defense cuts and slower restocking.
One concern is that across-the-board government spending cuts that began on March 1 will shave a half-percentage point from growth this year. That may have also made businesses cautious about hiring last month.
Nearly 5.28 million people received unemployment aid in the week that ended March 23, the latest data available. That’s about 10,000 fewer than the previous week.