Economic Outlook Brightens As Unemployment Claims Continue To Fall

The U.S. economic outlook brightens as unemployment claims fall.

The labor department reported on Thursday that applications for unemployment benefits fell to a seasonally adjusted 381,000 - the lowest it has been since February.

A four-week average for applications fell for the ninth time in 11 weeks to an eight-month low and employers added a net total of 120,000 jobs last month. The indication being that the U.S. economy is strengthening and businesses may begin to increase hiring.

Recently, retailers have reported a busy start to holiday shopping and last month the unemployment rate fell to a 2.5-year record low. This November, the unemployment rate fell to 8.6 percent down from 9 percent in October.

But what may not have been taken into account is the unemployed who gave up the job search. Once they stop looking for work, they are no longer categorized as unemployed.

Still, employers added a net total of 120,000 jobs last month. The economy has generated 100,000 or more jobs five months in a row - the first time that has happened since April 2006.

According to the AP, Ian Shepherdson, the chief U.S. economist at High Frequency Economics, said that the drop in unemployment benefit claims reflect that consumer demand didn't fall this season as some had feared.

"We expect claims to head slowly downwards for the foreseeable future, and in due course payroll growth will accelerate," Shepherdson wrote in a note to clients.

Economists expect growth to increase to an annual 3 percent.

Although the outlook in the U.S. has brightened, the crisis in Europe may reverse this progression. European leaders still can’t seem to find a way to contain the two-year debt crisis.

This could slow U.S. exports and lessening overseas profits. European banks may be forced to cut lending to U.S. banks, leading to a credit crisis.