Thu Aug 5, 2004
By Nancy Waitz

WASHINGTON (Reuters) - The number of people filing for initial U.S. jobless aid fell 11,000 last week, the government said on Thursday, as the pace of layoffs slowed and the job market brightened.

Initial jobless claims dropped to 336,000 in the week ended July 31 from a revised 347,000 in the prior week, the Labor Department said. The drop was slightly larger than economists' expectations for a fall to 340,000 from the originally reported 345,000 for the previous week.

U.S. government bonds saw small losses, while the dollar gained slightly against the euro after the claims data was released.

A Labor Department spokesman said the drop in new claims was not due to special factors and likely reflected an end to the volatility normally experienced in July.

The closely watched four-week moving average, which irons out weekly volatility, rose to 343,500 in the week ended July 31 from 336,750 in the previous week.

While new claims have bounced up and down since the beginning of the year, the overall trend is on the decline, suggesting the pace of layoffs has slowed.

"It's a good number for the economy ... It doesn't change the four-week moving average, but still the claims numbers suggest that whatever gain in jobs you get in July should be maintained in August," said Cary Leahey, senior U.S. economist for Deutsche Bank Securities.

"There's no reason to think that the labor market is stumbling," Leahey said.

The number of people who continue to collect benefits dropped 35,000 to 2.91 million in the July 24 week, the latest week for which figures are available.

The jobless claims data were in line with a spate of recent economic reports that give upbeat signals on the growth outlook.

Though the pace of expansion slowed in June, and new job growth during the month came in below forecasts, there have been some signs that consumers remain optimistic and that the early summer lull will be a temporary one.

Factory orders increased 0.7 percent in June after a 0.4 percent pickup in May and fit with an earlier Institute for Supply Management poll issued on Monday that showed U.S. factories were busier in July.

As well, the University of Michigan consumer confidence survey that became public last Friday indicated a modest brightening in sentiment during July -- a vital element in supporting a sustained recovery.

The overall decline in the level of claims could reinforce expectations for a sign of strength in the July employment report scheduled for release on Friday.

In a Reuters poll, economists predicted a 228,000 rise in new jobs, after a disappointing 112,000 gain in June.

The monthly employment report gives a broad look at labor market conditions throughout the economy. The unemployment rate is expected to remain unchanged at 5.6 percent in July.

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