The long-suffering US job market is ending the year better off than it began.
The number of people applying for unemployment benefits each week has dropped by 10 percent since January. The unemployment rate, 8.6 percent last month, is at its lowest level in nearly three years.
Factory output is rising, business owners say they are more optimistic about hiring and consumer confidence has jumped to its highest level since April. Even the beleaguered housing market is looking slightly better.
“We are ending the year on an up note,” Naroff Economic Advisors president Joel Naroff said.
Still, 25 million Americans remain out of work or unable to find full-time jobs. Most analysts forecast a stronger economy and job growth next year — and rule out a second recession — but they say that could change if Europe’s debt crisis worsens or consumers pull back on spending.
On Thursday, the US Department of Labor said the number of people applying for unemployment benefits last week rose 15,000 to 381,000. However, the four-week average, a less volatile measure, dropped to 375,000 — the lowest level since June 2008.
When applications for unemployment benefits consistently fall below 375,000, economists consider it a reasonable sign that hiring is rising enough to push the unemployment rate lower. The four-week average has remained below 400,000 for seven weeks, the longest stretch since April.
A mildly positive report on housing also came out on -Thursday. The National Association of Realtors said the number of people who signed contracts to buy homes rose last month to its highest level in a year-and-a-half, although the number of canceled contracts is also on the rise.
Most analysts now say another recession is unlikely.
The economy likely grew at an annual rate of 3 percent or more in the final three months of this year, analysts say. That would top the 1.8 percent growth rate in the July-September quarter, and the 0.9 percent growth rate in the first half of the year.
Employers have added an average of 143,000 net jobs a month from September through last month. That is almost double the pace for the previous three months, although it is below the pace from the first quarter of the year.
Next year should be even better for hiring. The Associated Press surveyed 36 economists earlier this month who said they expect the economy to generate an average of about 175,000 jobs per month next year. That is almost double the pace for the previous three months, but not as high as job growth in the first quarter of the year.
Consumers are also growing more confident.
The Conference Board said on Tuesday that its consumer confidence index rose to 64.5 this month, the highest reading since April.
Still, the economy and job market remain vulnerable to setbacks.
Economists view Europe as the biggest threat to the global economy next year. Europe is expected to fall into recession as banks reduce lending and countries cut spending and raise taxes in response to a simmering government-debt crisis.
In the worst case scenario, a government default could destabilize the eurozone financial system and trigger a global panic.
Economists are also concerned that consumer spending in the US could taper off if wages — which did not keep up with inflation this year — do not rise faster or if families decide to purchase less on credit.