Fewer Americans sought unemployment aid last week, reducing the average number of weekly applications last month to a five-year low.
The drop shows that fewer layoffs are strengthening the job market.
The Labor Department said today that applications fell 10,000 to a seasonally adjusted 332,000. That pushed the four-week average to 346,750, the lowest since March 2008, just several months after the Great Recession began.
Applications are a proxy for layoffs and they have fallen nearly 13% since November. At the same time, net hiring has picked up.
Employers have added an average of 200,000 jobs a month from November to February, up from about 150,000 a month in the previous four months.
The unemployment rate fell to a four-year low of 7.7% in February from 7.9% the previous month.
The improvement in the job market shows employers are not cutting more jobs because of worries about higher taxes or government spending cuts. In January, federal Social Security taxes rose two percentage points.
Someone earning $50,000 has about $1,000 less to spend in 2013 and a household with two high-paid workers has up to $4,500 less.
On March 1, $44 billion in across-the-board government spending cuts started after the White House and Congress failed to reach a deal to avoid the reductions. But higher taxes have not prevented Americans from spending more.
Retail sales jumped in February by the most in five months, the Commerce Department said yesterday, with much of the increase reflected higher petrol prices. But even excluding the volatile categories of petrol, cars and building supply stores, so-called core retail sales rose strongly.
Strong car sales and a healthy recovery in housing are spurring more hiring and economic growth. Builders started work on the most homes last year since 2008. New-home sales jumped 16% in January to the highest level since July 2008. And home prices, meanwhile, rose by the most in more than six years in the 12 months ending in January, according to property data provider CoreLogic.