WASHINGTON (AP) â¿¿ Applications for U.S. unemployment aid likely rose last week, though they probably remained at a level consistent with modest job gains. Economists forecast that applications increased 20,000 to a seasonally adjusted 350,000, according to a survey by FactSet. The Labor Department will release the report at 8:30 a.m. EST Thursday. The department said last week that applications fell to their lowest level in five years. Some of that decline, however, likely reflected the government's difficulty adjusting its numbers to account for layoffs after the holiday shopping season. The weekly applications are a proxy for layoffs. While job cuts have fallen, hiring has yet to accelerate. Applications fluctuated between 360,000 and 390,000 for most of last year. At the same time, employers added an average of 153,000 jobs a month. That's just been enough to slowly push down the unemployment rate, which fell 0.7 percentage points last year to 7.8 percent. On Friday the government is scheduled to issue its January jobs report. Analysts forecast that it will show employers added 155,000 jobs, the same as in December. The unemployment rate is expected to remain at 7.8 percent for the third straight month. The government said Wednesday that the economy shrank at an annual rate of 0.1 percent in the October-December quarter, hurt by a sharp cut in defense spending, fewer exports and sluggish growth in company stockpiles. The contraction points to what is likely to be the biggest headwind for the economy this year: sharp government spending cuts and ongoing budget fights. The economy is forecast to grow around 2 percent this year as strength in areas like housing and auto sales could partly offset government cutbacks. But looming, across-the-board spending cuts, set to take effect March 1, would weaken a still-precarious recovery. Consumer spending increased at a faster pace in the fourth quarter, and businesses invested more in equipment and software. Home builders, meanwhile, are stepping up construction to meet rising demand. That should create more construction jobs.