New claims for unemployment insurance fell in the US last week, offering a glimmer of hope that firings could be abating in the stricken labour market.

Initial jobless claims declined by 11,000 to 457,000, the labour department said. That was a modestly steeper drop than economists had anticipated and left the less volatile four-week average of claims down at 452,500.

Meanwhile, the number of people continuing to claim benefits crept higher, climbing by 81,000 to 4.56m. Continuing claims had been easing recently as unemployed workers saw their benefits expire but analysts forecast that they will swell again now that Congress has approved another extension of unemployment insurance.

In spite of last week’s improvement, economists argue that claims remain too high for the economy to sustainably create jobs. Some claim that the traditional link between jobless claims and payrolls has been skewed because of ongoing extensions of benefits.

“We strongly suspect that the claims figures have been distorted upwards by the various benefit extensions available to the long-term unemployed,” noted economists at Capital Economics. They forecast that next week’s non-farm payrolls figures will show that the economy lost 75,000 jobs in July as census workers were dismissed.

With unemployment hovering near 10 per cent, the labour market remains the biggest weakness hindering the economy’s recovery.

In its latest Beige Book survey, the Federal Reserve noted pockets of improvement, with hiring stronger in the cities of New York, Chicago and Atlanta. However, Ben Bernanke, Fed chairman, said last week that the economic outlook remained “unusually uncertain”.

New claims were most prevalent in California and South Carolina, where job cuts in the services and manufacturing sectors grew. Fewer workers made new claims in New York, where firings in the transportation and services industries eased.

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