The number of Americans applying for unemployment benefits fell by 23,000 last week, further evidence that the job market is slowly returning to health.

Applications for unemployment aid declined to a seasonally adjusted 340,000 in the week ending May 18, the Labor Department said today.

That is down from 363,000 the previous week and a level consistent with solid job gains.

The less volatile four-week average ticked down just 500 to 339,500 - close to the five-year low of 338,000 registered during the first week of May.

The four-week average is 9% lower than in November, the Labor Department said.

Unemployment claims are a proxy for layoffs and the decline in claims has coincided with steady job growth over the past six months.

Since November, employers have added an average 208,000 jobs a month. That is up from just 138,000 jobs a month during the previous six months. Still, much of the improvement has come from fewer layoffs and not strong levels of hiring.

Employers laid off just 1.7 million workers in March, only slightly above the 12-year low reached in January. Overall hiring, however, remains far below pre-recession levels.

Over 4.7 million Americans were receiving unemployment benefits the week that ended May 4, down 23% from nearly 6.2 million a year earlier. The US still has 2.6 million fewer jobs than it did when the recession began in December 2007.

The unemployment has fallen to a four-year low of 7.5%, down from 10% in October 2009. But some of the decrease is because many people have given up looking for work. The government counts people as unemployed only if they are actively searching for a job.

For hiring to strengthen enough to lower the unemployment rate to a more normal level of between 5.5-6%, companies must gain more confidence in the economy. But some may be hesitant to add workers because of concerns of deep federal spending cuts and tax increases.

US Federal Reserve Chairman Ben Bernanke told a congressional committee yesterday that the job market is improving, but that higher taxes and government spending cuts likely will slow economic growth this year.

Bernanke said it was too early for the Fed to abandon its extraordinary efforts to boost economic growth by keeping short-term interest rates near zero and buying $85 billion in bonds every month to pump money into the economy and push down longer term interest rates.