Jobless claims drop by 10,000

Initial applications for unemployment benefits dropped for the third week in a row, to 340,000 for the week ended Oct. 26, the Labor Department said Thursday. That's 10,000 fewer than the previous week, showing employers aren't laying off as many workers.

However, the four-week average rose 8,000 to 356,250, the highest since April. The 16-day partial government shutdown and backlogs in California due to computer upgrades inflated the average, but didn't affect last week's numbers, a government spokesman said.

Applications are now close to the pre-recession levels that were reached in August, before California's computer problems distorted the data.

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Fewer applications are typically followed by more job gains. But hiring has slowed in recent months.

The shutdown likely negatively affected hiring even further in October. In addition to government contractors, other companies also likely cut jobs, such as restaurants and hotels located near national parks, which were closed. The shutdown ended Oct. 16. Some economists are forecasting that job gains in October could be 100,000 or less.

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Payroll provider ADP said Wednesday that businesses added just 130,000 jobs in October. That's down from ADP's estimate of 145,000 private-sector jobs added in September.

The Federal Reserve said Wednesday that the economy is growing at a moderate pace but still needs its support. Fed policymakers decided to continue purchasing $85 billion a month in bonds. The bond purchases are intended to lower long-term interest rates and encourage more borrowing and spending.

In a statement, the Fed struck a slightly more optimistic tone about the economy. That suggests the Fed might pull back on its stimulus as early as December, economists said.

Contributing: Associated Press