The number of Americans claiming new jobless benefitsdropped to a four-month low last week, a sliver of hope for an economy that has been battered by a credit rating downgrade and falling share prices.

Initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 395,000, the Labor Department said on Thursday, the lowest level since the week ended April 2. That was below economists' expectations for a reading of 400,000.

"This could suggest that labor markets aren't rapidly deteriorating, even if it still doesn't shed much light on what's happening on the hiring side of the equation," said Sean Incremona, an economist at 4CAST in New York.

But the optimism generated by the claims report was dampened somewhat by a surprise widening in the trade deficit in June. The June trade deficit jumped to $53.1 billion, the largest since October 2008, from $50.8 billion in May.

The wider trade shortfall could cause second-quarter's 1.3 percent annual growth pace to be revised lower.

U.S. stock index futures pared losses on the claims data, while the dollar extended gains against the euro.

The Federal Reserve said on Tuesday economic growth was considerably weaker than expected and unemployment would fall only gradually. The U.S. central bank promised to keep interest rates near zero until at least mid-2013.

Hiring accelerated in July after abruptly slowing in the past two months. However, there are worries that a sharp sell-off in stocks and a nasty fight between Democrats and Republicans over raising the government's debt ceiling could dampen employers' enthusiasm to hire new workers.

"We're looking toward a period of financial instability ... and that probably will inspire a lot of caution and nowadays, caution translates into layoffs," said Pierre Ellis, a senior economist at Decision Economics in New York.

"We'll see what happens next week, but the outlook for the August U.S. employment report is still for a result as good as it was in July, maybe better."

The continued improvement in the labor market could help to allay fears of a new recession, which have been stoked by the economy's anemic growth pace in the first half of the year.

A Labor Department official said there was nothing unusual in the state-level claims data, adding that only one state had been estimated.

The four-week moving average of claims, considered a better measure of labor market trends, slipped 3,250 to 405,000. Economists say both initial claims and the four-week average need to drop close to 350,000 to signal a sustainable improvement in the labor market.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 60,000 to 3.69 million in the week ended July 30.

The number of Americans on emergency unemployment benefits fell 26,309 to 3.16 million in the week ended July 23, the latest week for which data is available.

A total of 7.48 million people were claiming unemployment benefits during that period under all programs, down 89,945 from the prior week.