CHRISTOPHER S. RUGABER
AP Economics Writer
WASHINGTON (AP) -- The job market is sending signs that it may be strengthening.
The number of people seeking unemployment benefits has sunk to its lowest point in six years because few companies are laying anyone off anymore.
A survey of service companies found that they added jobs last month at their fastest pace in six months.
And more small businesses say they plan to hire than at any point since the recession began.
All of which is prompting some economists to forecast a healthier job gain in September than the economy has produced in recent months.
"If you put all that together, it suggests that there has been an improvement in job market conditions," said Paul Ashworth, an economist at Capital Economics.
Ashworth predicts that employers will have added 220,000 jobs in September. That would be the biggest gain in nearly seven months and would mark a sharp reversal from the summer. Job growth has averaged just 155,000 a month since April, down from 205,000 in the first four months of the year.
The unemployment rate dropped to 7.3 percent in August from 7.4 percent in July. But the drop mostly occurred because more Americans stopped working or looking for jobs. The government no longer counts people without a job as unemployed once they stop looking for one.
The Federal Reserve is monitoring the jobs data as it considers when to slow its $85 billion in monthly bond purchases. Those purchases are intended to keep interest rates low and speed borrowing, spending and economic growth.
Fed Chairman Ben Bernanke noted last week that the job market is "still far from what all of us would like to see."
Yet it might already be improving.
Last week, applications for unemployment benefits fell 5,000 to a seasonally adjusted 305,000. The number had reached 294,000 two weeks earlier, but that figure was distorted by computer upgrades in California and Nevada that prevented those states from processing all their claims. Those two states have now caught up and are reporting complete data, the government says.
Excluding the distorted figure, last week's 305,000 applications were the fewest since September 2007, three months before the Great Recession began.
Applications generally reflect the pace of layoffs. Layoffs had already fallen in July to the lowest on records dating back to 2000, according to a separate report. Applications have dropped an additional 7 percent since then.
The dwindling number of people seeking unemployment benefits "is signaling further acceleration in payroll gains," Jim O'Sullivan, an economist at High Frequency Economics, said in a note to clients.
Separately, the Institute for Supply Management, a trade group of purchasing managers, said this month that service companies stepped up hiring last month. Service companies employ 90 percent of the U.S. workforce and range from the retail and construction industries to health care and financial services.
Manufacturers also added jobs in August, the institute found, though at a slower pace than in July.
In addition, the National Federation of Independent Business has said the percentage of small businesses that plan to add workers rose this month to the highest level since January 2007.
The economy is growing steadily, though sluggishly. It expanded at a 2.5 percent annual pace from April to June, the government has estimated. That is up from a scant 1.1 percent annual rate from January through March. For the first six months of the year, the economy has grown at a rate of just 1.8 percent.
Economists worry that growth is slowing to an annual rate of 2 percent or less in the current July-September quarter. If correct, that would mark the third quarter in the past four that the annual growth rate has fallen to 2 percent or below, an abnormally low level.
About 3.9 million Americans received unemployment benefits in the week that ended Sept. 7, about 23,000 more than in the previous week. That total has fallen 32 percent in the past year.
Some recipients likely found jobs, but many have used up all the unemployment benefits available to them.
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