Unemployment claims drop 25,000

• New claims for unemployment benefits fell to 370,000
• A spike in claims caused by Sandy is fading
• 4-week average of claims rose to 408,000

The number of people seeking unemployment benefits fell sharply last week as a temporary spike caused by Superstorm Sandy faded.

Weekly applications have fallen back to a level consistent with modest hiring.

The Labor Department says applications dropped 25,000 last week to a seasonally adjusted 370,000.

Unemployment aid applications spiked a month ago after Sandy shuttered businesses in the Northeast. Applications jumped to 451,000 in the week ended Nov. 10. People can claim unemployment benefits if their workplaces are forced to close and they aren't paid.

The early impact of Sandy can still be seen in the four-week average. It rose 2,250 to 408,000 last week.

Before the storm hit Oct. 29, applications had fluctuated this year between 360,000 and 390,000. That coincided with modest declines in the unemployment rate.

The storm is also likely to depress November's job figures, which the government will report Friday. And fears over looming tax increases and spending cuts, known as the "fiscal cliff," may have also dampened job gains last month.

Economists expect the Labor Department to report Friday that employers added 110,000 jobs in November. And they think the unemployment rate will remain 7.9%, according to FactSet.

Some analysts expect much lower job gains, roughly 25,000 to 50,000, because of Sandy and anxiety over the fiscal cliff.

Still, most analysts say the underlying economy is healthy and is creating jobs at a modest but steady pace.

Without the depressive effects of Sandy and the cliff, many believe employers would have added up to 200,000 jobs last month — even stronger than the solid 171,000 jobs added in October. And it would be better than the 174,000 jobs a month averaged in the July-September quarter.