Sharp fall in US jobless claims boosts outlook

Still, if applications remain consistently below 350,000, net job growth should increase, said Carl Riccadonna, an economist at Deutsche Bank. Monthly gains could rise to an average of 225,000 per month, he added.

Gains at that level should steadily lower the still-high unemployment rate, which ticked up to 7.9 percent in January from 7.8 percent in December.

Economists expect the rate will decline if hiring continues at last year's monthly pace of 180,000. The rate fell 0.7 percentage points in 2012.

The number of people receiving benefits has increased. More than 5.9 million people received benefits in the week ended Jan. 26, the latest data available. That was about 325,000 more than the previous week.

The economy contracted at an annual rate of 0.1 percent in the October-December quarter, hurt by a sharp cut in defense spending, fewer exports and sluggish growth in company stockpiles. That's much slower than the 3.1 percent growth recorded in the July-September period.

Still, economists expect that figure will be revised in the coming months to show a small increase, after more data about last quarter has been reported. Economists at Barclays Capital estimate the economy expanded 0.5 percent in the fourth quarter.

Growth will likely pick up a bit in the January-March quarter to an annual rate of 1.5 percent, analysts forecast. That's better than the fourth quarter but below last year's expansion of 2.2 percent.