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The job market is looking a little brighter at the start of the new year.

Weekly unemployment benefit applications have fallen to levels last seen more than three years ago. Holiday sales were solid. Service companies grew a little faster in December. And many small businesses say they plan to add jobs over the next three months.

The mix of private and government data released Thursday sketched a picture of an economy that is slowly strengthening, stoking optimism one day ahead of the government’s important read on December job growth.

“Businesses have increased hiring to meet the underlying pick-up in (consumer) demand,” said Neil Dutta, an economist at Bank of America Merrill Lynch.

The mostly positive reports had little impact on financial markets. Traders seemed more focused on the debt crisis in Europe, which could slow U.S. growth later this year. The Dow Jones industrial average dropped 37 points in midday trading. Broader indexes were mixed.

Weekly applications for unemployment benefits dropped to a seasonally adjusted 372,000 last week, the Labor Department said Thursday. That’s 11 percent lower than the same time last year.

The four-week average, which smooths fluctuations, fell to 373,250 _ the lowest level since June 2008.

When applications drop below 375,000 _ consistently _ they generally signal that hiring is strong enough to reduce the unemployment rate.

Steven Wood, an economist at Insight Economics, said applications last year averaged 411,000 per week, down from 459,000 per week in 2010.

That’s “a clear indication that the pace of layoffs has slowed,” Wood said.

U.S. service firms, which employ roughly 90 percent of the work force, grew a little faster in December, according to the Institute for Supply Management.

The trade group of purchasing managers said its index of non-manufacturing activity rose to 52.6. That’s slightly above November’s reading of 52 _ the lowest in nearly two years _ but well below last year’s high of 59.7 recorded in February.

Any reading above 50 indicates expansion.

An increase in new orders and stronger imports drove last month’s modest expansion. But a gauge of hiring showed many service firms were hesitant to add workers no fax payday advance.

Retailers, meanwhile, reported solid but not spectacular sales gains last month. And much of the increase stemmed from heavy discounting that will likely cut into profits.

Sales rose 3.5 percent in December for a group of 25 retail chains tracked by the International Council of Shopping Centers. Holiday sales, which cover the last two months of the year, rose 3.3 percent, a decent rise but less than last year’s gain.

Small businesses remain encouraged about their plans to hire over the next three months. The National Federation of Independent Business says the proportion of those firms that expect to add workers is slightly off from the three-year high hit last month.

Economists are predicting that overall 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. Still, about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they’re no longer counted as unemployed.

The pickup in hiring reflects some modest improvement in the economy. Growth will likely top 3 percent at an annual rate in the final three months of this year, economists expect. That would be a sharp improvement over the 1.8 percent growth in the July-September quarter.

Even so, many economists forecast that growth could slow to roughly 2 percent this year. Europe is almost certain to fall into recession because of its financial troubles. And without more jobs and higher incomes, consumers may have to cut back on spending. That could drag on growth in 2012.

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AP Economics Writer Martin Crutsinger contributed to this report.

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Stocks rose early Friday as spending cuts by Italy lifted traders’ hopes about Europe’s progress toward taming its debt crisis. A flat reading on U.S. inflation sent bond yields lower.

World markets rose Friday after Italy’s lower house of parliament approved an austerity package in hopes of lowering the country’s escalating borrowing costs.

The Dow Jones industrial average is up 58 points, or 0.5 percent, at 11,926 in the first half-hour of trading. The Standard & Poor’s 500 index is up 8, or 0.7 percent, at 1,224. The Nasdaq composite index is up 22, or 0.9 percent, at 2,563.

The gains were broad. Nine of the 10 industry groups in the S&P 500 index rose, led by industrial and technology companies. Telecommunications was the only sector to fall, by 0.3 percent.

The yield on the 10-year Treasury note plunged to 1.88 percent from 1.93 percent earlier Friday after the government said consumer prices were unchanged last month, suggesting that inflation remains low. Low inflation makes bonds more attractive because it doesn’t diminish the buying power of the fixed return a bond provides over time.

BlackBerry maker Research In Motion Ltd. plunged 12 percent after the company said late Thursday that new phones seen as critical to the company’s future will be delayed until late next year. The company is also taking a big loss on unsold tablet computers and predicted that its BlackBerry sales will fall sharply during the holiday period.

If stocks hold their gains, it will be only be the second up day this week. Indexes rose Thursday after positive economic news brought relief to choppy markets. The Dow rose 45 points after separate reports showed sharply fewer layoffs and better business conditions for factories on the Eastern seaboard.

World markets followed U cash advance.S. markets higher Friday as the European debt crisis failed to produce any worrying headlines. Bad news out of Europe has overshadowed positive economic news for months.

Italy’s austerity measures are seen as a crucial step toward soothing fears about Europe. The nations’ borrowing costs have risen in recent weeks to levels at which other nations, such as Greece, were forced to take bailouts.

The cuts are aimed at persuading bond traders that Italy can emerge from the widening crisis without defaulting on its debts. The nation still sits on a $2.5 trillion powder keg of debt that could cause a global economic recession if it defaults.

Stocks mostly rose in Europe following gains in Asia. Britain’s FTSE added 0.5 percent and Italy’s benchmark index rose 0.4 percent.

Online game developer Zynga Inc. begins trading later Friday on the Nasdaq. The San Francisco company, which specializes in Facebook games, priced its initial public offering late Thursday at $10 per share, raising $1 billion. It’s the largest Internet IPO since Google Inc. went public in 2004.

Among companies making big moves:

_ New York-area cable TV provider Cablevision Systems Corp. plunged 14 percent, the most in the S&P 500, following the sudden departure of its chief operating officer, Tom Rutledge.

_ Adobe Systems Inc. jumped 8.4 percent, the most in the S&P 500, after the software maker reported earnings and revenues that were far ahead of what analysts were expecting. Analyst Walter Pritchard at Citigroup said the quarter was a “blow-out when most expected weakness.”

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COLUMBIA, Mo.

Premier Mario Monti convened a Cabinet meeting in Rome on Sunday to discuss emergency austerity and growth measures aimed at saving the euro currency from collapse.

Monti is under extreme pressure to come up with speedy and credible measures that will persuade markets to stop betting against the common currency.

The Cabinet was originally scheduled to meet Monday, but was moved up following Monti’s weekend of meetings with political parties, unions, business groups and consumer lobbies.

The premier hasn’t disclosed details of his rescue plan, but has said it includes both austerity cuts and measures to boost growth in Italy’s anemic economy. He has promised it would be socially equitable, and that it would go after those who hadn’t paid their share of taxes before.

With the meeting still under way, Monti’s office issued a statement saying the package was still under discussion.

The various parties briefed have said the package likely includes reinstating an unpopular home property tax abolished by Berlusconi, raising the sales tax and the income tax at the highest brackets by a few percentage points, and requiring Italians to work more than the 40 years now needed to receive a pension.

The head of Italy’s industrial lobby said Sunday that the survival of the common euro currency depends on Italy’s coming up with very strong austerity and growth measures _ followed by a concerted effort at the European level so that Italian sacrifices are not in vain.

Confindustria President Emma Marcegaglia told reporters after meeting with Monti that the measures are “very heavy.”

The coming days “will decided if the euro will survive or not no fax payday loans. The first move to save the euro is in Italian hands, with a very strong measures,” Marcegaglia said. The measures will be “fundamental to saving Italy and to saving the euro.”

Italian borrowing costs have spiked, which could spell disaster if Italy is unable to keep up on payments to service its enormous debt of euro1.9 trillion ($2.57 trillion), or 120 percent of its GDP.

Unlike Greece, Portugal and Ireland, which got bailouts after their borrowing rates skyrocketed, the eurozone’s third-largest economy is considered to be too big to bail out. An Italian default would be disastrous for the 17-member eurozone and reverberate throughout the global economy.

Union head Raffaele Bonnani, however, urged Monti to reconsider raising the pension age across the board, saying that workers in hard labor should be allowed to retire without added requirements, and that women who join the work force after raising children might have to work well into old age if the 40-year seniority requirement were raised.

But he said he was against calling a general strike at this sensitive moment, and would instead pursue a policy of negotiation with the government.

Marcegaglia said the measures were concentrated on raising taxes _ and to balance that she called for an immediate look at ways to cut political and bureaucratic spending. “This kind of fiscal pressure is not sustainable,” she said.

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Shops in India have closed their doors in observance of a nationwide strike to protest the government’s decision to allow big-box retailers in the country.

Hundreds of traders marched on New Delhi streets Thursday demanding the Cabinet revoke its decision. The strike was only partially observed in New Delhi, Mumbai and other cities.

The government provoked furor last week by deciding foreign retailers could own up to 51 percent of supermarkets and 100 percent of single-brand stores. Shopowners fear that the entry of companies such as Wal-Mart and Tesco will crush local mom-and-pop stores.

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China’s sovereign wealth fund wants to invest in improving neglected U.S. and European roads and other infrastructure to spur global growth, the fund’s chairman said in comments published Monday.

The announcement reflects a shift in strategy for the $410 billion fund, which was created in 2007. Until now, it has limited its investments mostly to small stakes in publicly traded companies to avoid stirring political opposition overseas.

China Investment Corp. wants to begin in Britain by teaming up with fund managers or investing directly in infrastructure projects, Lou Jiwei said in a commentary in London’s Financial Times newspaper.

“China is keen to get involved” in improving U.S. and European infrastructure, which “badly needs more investment,” Lou wrote. He cited energy, water, transport, digital communications and waste disposal but gave no indication of possible projects or the size of Chinese investment.

Some commentators in both Europe and China have suggested Beijing might use its $3.2 trillion in foreign reserves to gain leverage on political or trade issues at a time when other governments urgently want investment.

CIC was created to invest abroad in hopes of earning a better return on China’s foreign reserves, the bulk of which are in U.S. and European government bonds. It says investments are made on commercial rather than political grounds.

The move into infrastructure probably reflects CIC’s commercial views, rather than those of the government, said Citigroup economist Minggao Shen. He said it could help CIC earn a more stable profit and reduce Beijing’s exposure to U.S. and European government bonds amid volatile markets.

Some Chinese commentators have called for Beijing to reduce its exposure to the financial woes of Western governments by buying fewer bonds. China is Washington’s biggest foreign bondholder, with $1.15 trillion in Treasury debt as of September.

“There is a general thought that maybe China should not invest in U.S. Treasurys or European sovereign bonds. Instead, why can’t we hold direct assets in the economy?” Shen said.

By investing in individual projects, he said, “you don’t have to depend on government guarantees and it should be affected less by the sovereign debt crisis.”

CIC faced criticism over the performance of investments made just as the financial crisis was developing. But its results have improved and the fund reported an 11.7 percent return on assets last year.

Lou stressed that CIC is a commercial investor and wants to make a profit.

“CIC believes that such an investment, guided by commercial principles, offers the chance of a win-win solution for all,” he wrote.

Lou gave no indication in which other countries the CIC might invest but cited an estimate that the United States needs to spend at least $2.2 trillion in infrastructure repairs or rebuilding.

“Free of the inflationary pressure that afflicts many emerging economies, the U.S. and Europe should make substantial investment,” he said. “We cannot count on developing countries to deliver a stable economic recovery on their own.”

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Asian stock markets were mostly lower Friday as the results of a meeting among leaders of Europe’s biggest economies disappointed investors and Portugal’s credit rating was lowered to junk.

Japan’s Nikkei 225 index fell marginally to 8,161.87 while South Korea’s Kospi lost 0.9 percent at 1,779.93. Hong Kong’s Hang Seng dropped 0.8 percent to 17,790.54 and Australia’s S&P/ASX 200 shed 1.4 percent at 3,989.

Investment sentiment continued to wane after a meeting Thursday in Strasbourg, France of the leaders of the three biggest euro economies: Italian Premier Mario Monti, French President Nicolas Sarkozy and German Chancellor Angela Merkel.

The three leaders pledged to push for changes to European Union treaties to bring the fiscal policies of countries using the euro common currency more in line with each other.

Many investors were hoping Merkel might drop her steadfast opposition to a greater role for the European Central Bank or the creation of a eurobond that would pool the debts of all countries in the currency union. Some experts believe the ECB is the only institution capable of getting Europe past its debt crisis.

Piled onto the disappointment from the Strasbourg summit was a debt demotion for Portugal cash advance flexible payments.

Fitch Ratings, citing Portugal’s large fiscal imbalances, its high indebtedness across all sectors and an adverse macroeconomic outlook, reduced the country’s credit rating to BB+. That means Portugal is considered non-investment grade by Fitch, making it even more difficult for the struggling country to return to the bond markets.

In the U.S., markets were closed for the Thanksgiving on Thursday. A crucial test comes on so-called Black Friday _ the day that kicks off the holiday shopping season.

How well retailers do during the biggest shopping season of the year will have consequences for the still-fragile U.S. economic recovery.

The spending of consumers, which accounts for about 70 percent of U.S. economic activity, can impact stores’ expansion plans and inventory decisions into the new year. That trickles through the rest of the economy, from suppliers to jobs.

The November-December period accounts for 25-40 percent of annual sales. About a quarter of jobs in the U.S. are directly or indirectly supported by the retail industry.

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Egyptian riot police firing tear gas and rubber bullets stormed into Cairo’s Tahrir Square Saturday to dismantle a protest tent camp, setting off clashes that killed one protester, injured hundreds and raised tension days before the first elections since Hosni Mubarak’s ouster.

The scenes of protesters fighting with black-clad police forces were reminiscent of the 18-day uprising that forced an end to Mubarak’s rule in February. Hundreds of protesters fought back, hurling stones and setting an armored police vehicle ablaze.

The violence raised fears of new unrest surrounding the parliamentary elections that are due to begin on Nov. 28. Public anger has risen over the slow pace of reforms and apparent attempts by Egypt’s ruling generals to retain power over a future civilian government payday advance lenders.

Witnesses said the clashes began when police dismantled a tent camp commemorating the hundreds of protesters killed in the uprising and attacked about 200 demonstrators who had camped in the square overnight in an attempt to restart a long-term sit-in there.

Police fired rubber bullets, tear gas and beat protesters with batons. A 23-year-old protester died from a gunshot, said Health Ministry official Mohammed el-Sherbeni. At least 676 people were injured, he said.

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The International Monetary Fund says China’s banks face growing risks due to a credit boom and it urged Beijing to reduce the government role in lending decisions.

The report Tuesday adds to warnings by industry analysts that China’s banks face a possible rise in bad loans and other problems after a flood of lending helped it rebound quickly from the 2008 global crisis.

The IMF cited possible risks from a fall in soaring real estate prices, a rise in bad loans due to crisis-related lending and growing imbalances in an economy that relies heavily on exports and investment direct payday lenders.

The IMF urged Beijing to move further toward using interest rates instead of direct orders to regulate lending.

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A push to build a Pacific free trade bloc gained ground Friday with Japan’s decision to join negotiations, as Asia-Pacific leaders converging on Hawaii for an annual summit mulled ways to prevent Europe’s crisis from derailing the global recovery.

The weekend meeting of the 21-member Asia-Pacific Economic Cooperation forum, which brings together leaders from Russia to Chile, is focused on creating jobs and business through nuts-and-bolts measures such as investment in infrastructure and reforms aimed at providing more access to financing for the poor.

Such moves are gaining urgency, with the European Union warning of a possible “deep and prolonged recession” next year as the debt crisis that has engulfed Ireland, Portugal and Greece shows signs of spiraling out of control. A European recession would be felt sharply in the U.S., where growth is already anemic, and in Asia, which relies on Europe as a big market for its cars, clothing, consumer electronics and other exports.

“In the coming 12 months there is quite a strong likelihood that things will go worse,” Hong Kong’s chief executive, Donald Tsang, told a gathering of business leaders on the sidelines of the APEC meetings. “Global performance will be dragged down and then there will be an awakening, I hope,” he said.

U.S. Secretary of State Hillary Clinton said in opening a meeting of foreign and economic ministers that many forces outside the Pacific region will have an impact on it. “Global trends and world events have given us a full and formidable agenda,” she said. “And the stakes are high for all of us.”

As host of the annual summit, the U.S. has made expanding trade, promoting green growth and deepening cooperation on regulation and standards to help dismantle barriers to trade and nurture faster growth.

“We’ve even created an unofficial slogan: ‘Get Stuff Done,” Clinton said.

The U.S. also is hoping to garner support for a Pacific free trade pact that many APEC members see as a building block for a free trade area that encompasses all of Asia and the Pacific, covering half the world’s commerce and two-fifths of its trade.

That goal advanced Friday with Japan’s announcement that it will seek to join the bloc, called the Trans-Pacific Partnership, despite strong opposition from farmers fearful of exposure to greater foreign competition.

The Pacific trade pact, known as the TPP, currently includes Chile, New Zealand, Brunei and Singapore _ all relatively small economies. The U.S., Australia, Malaysia, Vietnam and Peru are negotiating to join. The participation of Japan, the world’s third-largest economy, would vastly expand its reach.

At the same time they are working toward a broader agreement, countries continue to forge separate free-trade agreements. On Friday, Vietnam and Chile were to due to sign a free trade agreement on the sidelines of the APEC meetings.

The U.S. recently clinched long-sought free trade pacts with South Korea, Colombia, and Panama _ agreements that if ratified will bring to 20 the number of countries that have free trade agreements with the U.S.

In Honolulu, Washington was keeping up pressure on China to commit to faster trade liberalization and to freeing its currency, which U.S. officials say remains undervalued even though it has gained substantially against the U.S. dollar in recent years.

A statement by APEC finance ministers released Thursday included a call for exchange rate flexibility. Treasury Department officials said China’s willingness to back such a commitment _ both at the Group of 20 meeting in Cannes last week and in Honolulu this week _ could encourage similar moves by other Asia-Pacific economies.

But Beijing’s apparent openness to move faster on its currency policy was not matched by similar support for the Trans-Pacific Partnership, which earlier this week a senior official in Beijing described as “overly ambitious.”

Overall, given APEC’s lack of negotiating power _ all decisions are by consensus _ prospects for major changes are slim. But over the years the group’s incremental efforts have helped build support for closer economic ties and freer trade.

Clinton said that by agreeing on something as rudimentary as shared safety standards for televisions, countries in the region saw exports of TVs jump by nearly half in three years.

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