Weekly unemployment claims dropped to 388,000 last week, hitting their lowest rate in more than two years.
Coupled with other signs of economic growth, the report from the Labor Department comes as welcome news for both the White House and congressional Republicans, who agreed to a massive $858 billion tax package this month meant in part to spark the economy and lower the jobless rate.
This is the first time weekly claims have fallen below 400,000 since July 1988, and the figures beat economic prediction that weekly claims would fall by around 2,000. Claims for the previous week stood at 422,000.
Stocks opened up on the news as markets looked to close a month of growth that has put indexes up as much as 10 percent for the year.
The four-week average of unemployment claims — meant to smooth out volatility in the weekly numbers — also dropped from 426,500 to 414,000.
Weekly claims reflect the week ending Dec. 25.
The tax package approved by Congress this month extends all of the Bush-era tax rates for two years. It also includes a 13-month extension of federal unemployment benefits and introduces a 2 percentage point reduction in the payroll tax for all workers for one year.
Both of those provisions were demanded by President Obama and are meant to provide additional stimulus to the economy.
Republicans had warned that if tax rates on wealthier taxpayers were raised, as Obama wanted, it would have hurt the economic recovery.
The jobless rate stood at 9.8 percent in November, with the report for December due one week from Friday.
High unemployment has damaged the White House and congressional Democrats politically for two years and contributed to a midterm election in which Obama’s party lost its House majority.