The number of Americans seeking unemployment benefits fell 11,000 last week to a seasonally adjusted 346,000, a level consistent with steady job growth.
The Labor Department said Thursday that applications dropped from 357,000 the previous week, which was revised up from an initially reported 354,000. The less volatile four-week average rose 4,500 to 352,500.
Weekly applications are a proxy for layoffs. They have fallen 7 percent in the past six months and hit a five-year low of 338,000 in early May.
Still, layoffs are only half of an improving jobs picture. The other is hiring, and companies have been reluctant to rapidly create many more jobs.
On Friday, the government reports on May employment. Economists expect it will show that employers added 170,000 jobs last month. The unemployment rate is expected to remain a four-year low of 7.5 percent.
Economists were encouraged by the figures, which come after several tepid economic reports earlier this week.
"While there is a fair bit of worry in some quarters about an economic slowdown, the stability seen in the weekly jobless claims data is quite reassuring," Dan Greenhaus, chief economic strategist at BTIG LLC, an institutional brokerage, said in a note to clients.
More than 4.6 million Americans received unemployment benefits in the week ended May 18, the latest data available. That's about 68,000 more than the previous week. The number of people receiving benefits briefly topped 11 million in 2010, the highest on record.
Job gains accelerated over the winter but have since softened, along with the broader economy.
Factory activity shrank in May for the first time since November, according to a survey by the Institute for Supply Management, a trade group of purchasing executives.
A separate ISM survey of service firms found that they grew at a faster pace last month. But a measure of employment in the report fell sharply. That suggests that service companies added fewer jobs. Service firms have been the main source of job gains in recent months.
There have been some positive signs of resilience in the economy. Service companies reported higher new orders. That suggests business could expand further in the coming months.
And steady gains in home sales and construction are providing crucial support for the economy.
Home prices jumped by the most in seven years in April, according a report by CoreLogic released Tuesday. Higher prices can make homeowners feel wealthier, spurring more spending.
They can also help sustain the recovery by encouraging would-be home buyers to purchase homes before prices rise further. Rising prices also give developers more incentives to build more homes. Builders applied for the most permits in nearly five years in April.