The four-week average declined to 373,250. Initial claims haven't been that low since June 2008, when the recession was raging.
When applications drop below 375,000 consistently they generally signal that hiring is strong enough to reduce the unemployment rate.
The downward trend in applications is one of several signs that show the economy ended the year with momentum. Retailers reported solid holiday sales, consumer confidence rose to the highest level since April, and November and December were the strongest months of 2011 for U.S. auto sales.
Unemployment benefit applications can be volatile around the end of the year.
Still, the overall trend is positive. Steven Wood, an economist at Insight Economics, said applications averaged 411,000 per week in 2011, down from 459,000 in 2010. That's "a clear indication that the pace of layoffs has slowed," Wood said.
Economists are predicting that hiring increased in December and will strengthen this year.
John Ryding, an economist at RDQ Economics, forecasts that employers added 180,000 jobs last month, a big jump from November's 120,000 net jobs.
Economists surveyed by The Associated Press project that the economy will generate an average of 175,000 jobs per month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.
In November, the unemployment rate fell to 8.6 percent from 9 percent.
Tribune reporter Paul Beebe contributed to this story.