updated 10/19/2006 9:24:26 AM ET 2006-10-19T13:24:26

The number of laid off workers filing claims for unemployment benefits dropped sharply last week to the lowest level in nearly three months.

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The Labor Department reported that 299,000 people filed for jobless benefits, a decline of 10,000 from the previous week. It was the lowest level for jobless claims since the week ending July 22.

The decline was bigger than analysts had been expecting and provided evidence that employers are still reluctant to lay off employees even though economic growth is slowing.

The decline in jobless applications last week pushed the four-week moving average for claims down to 307,750, the lowest point since late June.

After starting the year at a sizzling pace, the economy slowed sharply in the spring as consumers were battered by surging gasoline prices, rising interest rates and a cooling housing market.

Analysts believe growth slowed even further during the summer but concerns that the country could tumble into a recession have been eased by recent declines in energy prices, which have lifted consumer confidence and are expected to bolster consumer spending in the closing months of this year.

The Federal Reserve, after raising interest rates for two years, called a pause in the credit tightening at the August and September meetings. The central bank is widely expected to leave rates unchanged at next week's meeting given recent signs that the slowing economy is helping to relieve inflation pressures.

While employers have not boosted layoffs significantly, they have slowed hiring. For September, employers added just 51,000 jobs, the weakest showing in 11 months. The unemployment rate, however, dipped slightly to 4.6 percent.

For the week ending Oct. 7, the number of jobless claims totaled 309,000. The biggest increases in that week were in Michigan, which had a rise of 4,411 claims, reflecting layoffs in the auto industry and Pennsylvania, where layoffs rose by 4,338, reflecting problems in the construction, trade and service industries.

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