* U.S. initial jobless claims steady at 351,000 last week
* Reading is close to pre-recession levels
* U.S. home prices up 0.7 percent in December
By Jason Lange
WASHINGTON, Feb 23 (Reuters) - The number of Americans filing new claims for jobless benefits last week held at the lowest level since the early days of the 2007-2009 recession, signaling that the battered labor market is healing.
Workers filed 351,000 initial claims for state unemployment benefits, the same as in the prior week, the Labor Department said on Thursday.
The data suggests that a long cycle of heavy layoffs has run it course, laying the ground for more hiring.
“The economy is on the mend from a job creation perspective,” said Phil Orlando, a market strategist at Federated Investors in New York.
The last two weekly readings for claims were the lowest since March 2008, just three months after the deep recession began. Initial filings peaked above 650,000 in March 2009.
Signs of improvement in the job market have been growing.
The unemployment rate, which stood at 9.1 percent in August, dropped to 8.3 percent in January, and additions to payrolls have exceeded 200,000 for two straight months.
The latest jobless claims data covered the week that corresponds with the sample period for the government’s February payroll report, and suggests another solid month for hiring.
“It’s hard not to be optimistic about this,” said Brian Levitt, and economist at OppenheimerFunds in New York.
The U.S. Federal Reserve has left benchmark interest rates near zero since December 2008 to coax companies to take on more workers, and the recent improvement in the labor market has dampened expectations of further monetary stimulus.
Strong jobs and factory data have eased worries U.S. economic growth could slow sharply early this year, and even housing data has been relatively upbeat.
The Federal Housing Finance Agency reported on Thursday that U.S. home prices rose 0.7 percent in December. Sagging prices for housing have been a key factor holding that sector back since the recession.
But risks of a worsening of Europe’s debt crisis and rising oil prices still threaten the U.S. recovery.
The European Commission said the euro zone’s economy is heading into its second recession in just three years, while the wider EU will stagnate.
A Labor Department official said there was nothing unusual in last week’s initial claims data, although claims were estimated for three states, including California. Economists polled by Reuters had forecast initial claims would rise to 354,000 last week.
The four-week moving average for new claims, a measure of labor market trends, fell 7,000 to 359,000 - also the lowest since March 2008.
Wall Street stocks rose as investors bet the better jobs market would boost the economy and help company profits. Prices for U.S. government debt also climbed, while the dollar weakened against the euro following a better-than-expected reading for German business confidence.
The number of people receiving benefits under regular state programs after an initial week of aid fell 52,000 to 3.39 million in the week ended Feb. 1, a bigger drop than economists had expected.
These so-called continuing claims were at their lowest level since August 2008, boding well for payroll growth.
“Lower continuing claims is an indication that job losers are finding jobs,” Nomura said in a note to clients.
The improvements in the labor market have helped President Barack Obama’s re-election bid because voters consider jobs to be the most important issue in the November presidential poll.
But considerable slack still remains in the jobs market, with 23.8 million Americans either out of work or underemployed. There are no job openings for nearly three out of every four unemployed.
A total of 7.50 million people were claiming unemployment benefits during the week ended February 4 under all programs, down 178,619 from the prior week.