WASHINGTON (AP) — Fewer people sought U.S. unemployment benefits last week, evidence that employers are holding onto their staffs and may even step up hiring.

The Labor Department says weekly applications for unemployment aid dropped 18,000 to 259,000, the lowest level in two months. The four-week average, a less volatile measure, dropped to 267,000.

Applications are a proxy for layoffs, so the figures suggest that businesses are confident enough about the economy to keep their workers. Recent research by economists at JPMorgan Chase has found that fewer applications are consistent with steady hiring over time. Not as many people seek benefits when it is easier to find work.

Employers added just 38,000 jobs last month and an average of only 116,000 in the past three months, after growth slowed in the first quarter.