Unemployment benefit applications rose by 2,000 to a seasonally adjusted 366,000, the Labor Department said. The less volatile four-week average fell by 5,500 to 363,750. That was the lowest level since late March.
Applications have trended lower in the past two months, indicating companies are laying off fewer workers and hiring is picking up. When applications fall consistently below 375,000, it generally suggests hiring is strong enough to lower the unemployment rate.
"Claims so far in August have declined moderately compared to July, suggesting some improvement in the U.S. job environment. And that's good news," said Jennifer Lee, senior economist at BMO Capital Markets.
The total number of people receiving some kind of unemployment assistance also fell, dipping to 5.68 million for the week ending July 28, 70,000 below the previous week.
The decline in the number of people applying for weekly unemployment benefits has been one of several signs that the economy and hiring rebounded in July after falling into a spring slump.
Employers added 163,000 jobs in July, the most since February. Job gains averaged only 73,000 jobs a month from April through June, not enough to keep up with a rising population. The unemployment rate blipped up to 8.3 percent, from 8.2 percent.
Americans boosted their retail spending in July by the most in five months, according to the Commerce Department. That suggests some are more confidence in the economy.
And factory output also rose in July for the second straight month, according to the Federal Reserve. A large jump in auto production drove the increase.
Slower growth in consumer spending was the main reason growth slowed in the April-June quarter to an annual rate of 1.5 percent, down from 2 percent in the January-March quarter and 4.1 percent in the final three months of 2011.
Most economists say stronger growth is necessary to create enough jobs to lower unemployment.
The economy faces other challenges that may weigh further on growth.
Europe's financial crisis is expected to slow U.S. exports to that region, a direct strike against U.S. manufacturers. The 17 nations that use the euro saw their economies shrink, as a group, in the April-June quarter.
The U.S. may drive off a "fiscal cliff" at the end of this year as well. That's when a slate of tax cuts expire and big spending cuts are scheduled to kick in. If those changes aren't altered or delayed, recession is a very real possibility.
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