New US claims for unemployment benefits fell last week to their lowest level in more than two-and-a-half years, signalling a growing pace of job creation in the economy.
The labour market outlook was also cheered by data showing a gauge of services sector employment rose to a near five-year high in February.
Other data also confirmed a slowdown in business productivity that could herald stepped-up hiring.
Initial claims for state jobless benefits dropped 20,000 to 368,000, the lowest since May 2008, the US Labor Department said.
Economists had forecast claims rising to 398,000.
"There can be no denial that a strengthening in labour market conditions is under way, as layoffs have dropped sharply since the beginning of the year," said Jim Baird, a partner at Plante Moran Financial Advisors in Kalamazoo, Michigan.
"Coupled with increasing consumer demand, this should translate to a faster pace of job creation in time."
The data, together with a drop in oil prices as the Arab League considered a peace plan for Libya, lifted stocks on Wall Street.
The claims data falls outside the survey period for the government's closely watched employment report for February due for release on Friday.
A separate report showed growth in the country's services touched a fresh 5-1/2 year high in February. The Institute for Supply Management's index of national non-manufacturing activity rose to 59.7, the highest since August 2005, from 59.4 in January.
A reading above 50 indicates an expansion in the services sector, which accounts for about 80 percent of the US economy. A measure of employment in the sector hit its highest level since April 2006.
Declining claims suggest the economic recovery is gaining traction and fewer layoffs should help it weather the current high crude oil prices.
City A.M. Reporter