New U.S. claims for unemployment benefits dropped to a four-month low last week, government data showed on Thursday, a rare dose of good news 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, the lowest level since the week ended April 2.
Economists polled by Reuters had forecast claims steady at 400,000. The prior week's figure was revised up to 402,000 from the previously reported 400,000.
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.
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. (Reporting by Lucia Mutikani; Editing by Neil Stempleman)