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Jobless Claims Drop in Sign of Recovery

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By JEANNINE AVERSA, Associated Press Writer

WASHINGTON - The number of new people signing up for unemployment benefits dropped last week, a hopeful sign for the job market recovery.

The Labor Department (news - web sites) reported Thursday that new applications for jobless benefits declined by a seasonally adjusted 11,000 to 336,000 for the week ending July 31. It marked the lowest level since the beginning of July and was slightly better than some analysts were expecting. They were forecasting claims to fall to around 340,000 for last week.

New claims have bounced up and down in recent weeks, with much of the volatility associated with the impact of temporary shutdowns at auto plants to retool for new models, something that's done each year. Even so, the long-term trend in claims shows improvement. A year ago claims stood at 399,000.

Separately, many retailers reported lackluster sales gains in July, particularly mall-based apparel chains like Gap. Analysts attributed the disappointing sales to a variety of factors, including higher gasoline prices, which made some people more cautious spenders.

Wal-Mart and some other discounters had solid gains. Some high-end stores like Neiman Marcus also did well.

In financial markets, the Dow Jones industrials were off 77 points in early afternoon trading.

The jobless claims report also showed the number of workers continuing to draw unemployment benefits declined by 35,000 to 2.91 million for the week ending July 24, the most recent period for which that information is available. A year ago, that figure was 3.62 million.

While the economic recovery is on a solid path, the labor market recovery has been spotty.

The jobs climate has figured prominently in the presidential campaign, with President Bush (news - web sites) and his Democratic rival, John Kerry (news - web sites), offering vastly different assessments on the nation's economic health.

Economists are hopeful that job creation picked up in July. They are forecasting payrolls to grow by around 247,000, which would mark an improvement from the disappointing 112,000 jobs added in June. The government will release the employment report for July on Friday. The unemployment rate is expected to hold steady at 5.6 percent.

"Making sure that more jobs are created has ... been the top domestic priority of President Bush's administration," Treasury Secretary John Snow said in a visit to Akron, Ohio, Thursday.

Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites), appearing before Congress last month, noted that although businesses haven't completely let go of their caution, he expected hiring to improve somewhat in the months ahead.

Still, with the job situation uneven, Federal Reserve policy-makers have leeway to raise short-term interest rates gradually to head off any inflation problems, economists say. The Fed meets next week and economists expect policy-makers to boost rates by one-quarter percentage point. On June 30, the Fed increased interest rates for the first time in four years, raising a key rate to 1.25 percent from a 46-year low of 1 percent.

In addition to June's sluggish jobs-growth figures, other economic reports, including ones on retail sales and industrial production, suggested the economy hit a pothole in June.

The economy slowed in the April-to-June quarter, growing at an annual rate of 3 percent, down from 4.5 percent in the previous quarter. Analysts, however, continue to believe the economy will pick up speed in the current quarter.

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