WASHINGTON - Applications for unemployment benefits dropped last week to the second-lowest level this year, another sign that companies - even if they're not doing much hiring - are at least cutting fewer jobs.

First-time claims for jobless aid fell 17,000 to a seasonally adjusted 421,000 in the week ended Saturday, the Labor Department said Thursday.

The four-week average of claims, a less-volatile measure, dropped for the fifth straight week to 427,500. That is the lowest since August 2008, just before the financial crisis intensified with the collapse of Lehman Bros. Holdings Inc. the next month.

Unemployment claims have fallen steadily in the last two months. Applications fell to 410,000 two weeks ago - the lowest in more than two years - and they have been below 450,000 for the last five weeks. That is raising hopes that companies will soon accelerate hiring. The job market is also expected to benefit if Congress passes legislation that would extend tax cuts for two years and unemployment benefits through the end of 2011.

Still, unemployment claims have been below 425,000 for only two of the last three weeks. Economists say they need to be below that level for an extended period to have any real effect in lowering the nation's unemployment rate.

In November, the economy added just 39,000 net jobs, and the unemployment rate increased to 9.8 percent. Many economists say that was only a temporary setback and that the downward trend in unemployment claims, along with other strong economic data, suggests December will be a stronger month for hiring.

The latest report on jobless claims adds "weight to our view that the November employment report did not provide a very accurate reading on the strength of job creation," economists at RDQ Economics wrote in a note to clients. "We expect an upward revision to November payrolls and a more solid reading on job creation in December than we saw in November."

The weekly applications for unemployment benefits are considered a real-time snapshot of the job market. They reflect the level of layoffs but can also indicate whether companies are willing to add workers. First-time applications peaked during the recession at 651,000 in March 2009.