Labor market showing stronger signs of improvement

In fact, economists such as Moody's Analytics's Mark Zandi said employers are still hiring despite the looming spending cuts and tax hikes that Congress is struggling to solve. 

Business groups argue that uncertainty around the policies is holding back business investment even though companies have cash on hand. 

Still, in a survey released on Wednesday by the Business Roundtable, the nation's top corporate executives said their outlook for hiring down the road was slightly improved from the third quarter. 

CEOs suggested this week that a tax hike on the wealthiest taxpayers should be considered as part of a year-end "fiscal cliff" deal, along with spending cuts and entitlement reform. 

House Republican leaders warned on Wednesday that the Christmas holidays could be cut short if no agreement is reached. 

The four-week moving average, a better gauge of the trajectory of the labor market, fell 27,000, to 381,500. 

Economists argue that the labor market is healthier when applications fall below 375,000, with a hiring pace that is fast enough to bring down the unemployment rate.

The unemployment rate dropped to a four-year low of 7.7 percent, down from 7.9 percent, but that was mainly due to people who got frustrated and stopped looking for work. 

The jobless rate is expected to fluctuate in the coming months as more people re-enter the labor force to look for a job. 

Those jobs might be out there; the department reports that job openings were at a four-month high in October. Holiday hiring could hit its highest level in more than a decade if employers keep adding seasonal help in December.