The number of Americans filing new claims for unemployment benefits fell last week and job cuts declined sharply in December, suggesting the labor market is tightening.

Thursday's reports support views of faster growth this year, driven by consumer spending, despite a faltering global economy.

"Labor market conditions continue to improve, providing support for consumers and contributing to a virtuous cycle for the economy," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

Initial claims for state unemployment benefits slipped by 4,000 to a seasonally adjusted 294,000 for the week ended Jan. 3, the Labor Department said.

While that was a bit less than Wall Street's expectations of a drop to 290,000, the trend in claims remained consistent with a steadily tightening labor market. At current levels, claims probably have little room to fall further.

"Claims have never dropped below the 280,000-290,000 range in the last 20 years, reflecting the reality that a certain number of layoffs is a natural part of the growth/lifecycle of companies even in the best of times," said Anthony Karydakis, chief economic strategist at Millar Tabak in New York.

The four-week moving average of claims, a better measure of labor market trends as it irons out week-to-week volatility, held below the key 300,000 mark for the 17th straight week.

The data helped U.S. stocks rally for a second straight day, while U.S. government debt prices fell. The dollar climbed to a nine-year high against the euro on views the European Central Bank could soon embark on a monetary stimulus program to fend off a recession in the euro zone.

FEWER LAYOFFS

The strengthening job market backdrop could bring the Federal Reserve a step closer to raising its short-term interest rate, which it has kept near zero since December 2008.

In a separate report, global outplacement consultancy Challenger, Gray & Christmas said the number of job cuts announced by U.S. employers fell 9.2 percent in December.

For the whole of 2014, employers announced a total of 483,171 job cuts. That was 5 percent fewer than in 2013 and the smallest number since 1997.

"This bodes well for job seekers who will not only find more employment opportunities in 2015, but will enjoy increased job security once they are in those new positions," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

Reports on Wednesday showed a jump in small business hiring and another month of solid gains in private payrolls.

The government is expected to report on Friday that nonfarm payrolls rose by 240,000 in December after surging by 321,000 in November. That would mark the 11th consecutive month of job gains above 200,000, the longest stretch since 1994.

Overall employment gains in 2014 are expected to be the largest since 1999. The unemployment rate is forecast slipping one-tenth of a percentage point to 5.7 percent in December, which would be the lowest level since June 2008.