updated 9/21/2006 8:41:03 AM ET 2006-09-21T12:41:03

The number of newly laid-off workers filing for unemployment benefits rose last week by the largest amount since early August, providing further evidence that economy has slowed.

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The Labor Department said that 318,000 workers filed claims for jobless benefits, up by 7,000 from the 311,000 benefit applications filed the previous week. It followed two weeks of small declines in claims and was the biggest increase since jobless claims had risen by 10,000 in the week ending Aug. 5.

The increase was slightly higher than economists had been expecting and provided fresh evidence that the economy has been slowing this year under the impact of rising energy prices, high interest rates and a cooling housing market.

The total level of claims at 318,000 was the highest since claims hit 322,000 the week of Aug. 5.

The Federal Reserve on Wednesday voted to keep a key interest rate unchanged for the second consecutive month, preferring to wait to see whether its record string of 17 consecutive rate hikes will be enough to slow the economy to a more moderate pace and keep inflation at bay.

While the central bank said it remained alert to inflation risks, many economists believe the central bank will not tighten credit further and may start cutting rates early next year.

The economy is being buffeted by opposing forces at present. Recent sharp declines in the cost of gasoline and other energy products have raised hopes that consumer spending will get a boost in coming months as Americans pay less at the gas pumps and thus have more to spend on other products.

However, recent reports show that the nation’s once-booming housing industry, which had set sales records for five straight years, is rapidly falling back to earth with sales and construction dropping sharply.

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