updated 5/17/2007 8:46:03 AM ET 2007-05-17T12:46:03

Newly laid off workers filing applications for unemployment benefits fell last week for a fifth consecutive time, pushing jobless claims to the lowest level in four months.

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The Labor Department reported Thursday that jobless applications totaled 293,000 last week, down by 5,000 from the previous week.

The unexpected drop caught analysts by surprise. They have been expecting claims to begin rising as a result of the economic slowdown triggered by a steep slump in the housing industry.

While businesses so far have resisted laying off workers, many economists still believe the unemployment rate will start rising in coming months, climbing to perhaps as high as 5 percent by the end of the year.

The unemployment rate did rise from a historic low of 4.4 percent in March to 4.5 percent in April as businesses created just 88,000 jobs, the slowest job gain in 2½ years.

The economy, as measured by the gross domestic product, grew at a lackluster pace of just 1.3 percent in the first three months of this year, the weakest performance in four years, as troubles in housing continued to take their toll on overall growth.

Many analysts believe that growth will remain sluggish for the rest of this year as the housing industry continues to cope with a huge overhang of unsold homes and spreading troubles in the subprime mortgage market.

The level for jobless claims last week was the lowest since claims stood at 287,000 in the second week in January. With the string of weekly declines, the four-week average for claims was pushed down to 305,500 last week, the lowest point in 13 months.

For the week ending May 5, a total of 27 states and territories reported an increase in jobless claims while 26 states and territories had declines. The state data is not adjusted for seasonal variations.

The biggest decline was reported by New Jersey, a drop of 1,601 which was attributed to fewer layoffs in the construction and service industries. Connecticut saw jobless claims fall by 1,593.

The biggest increase in layoffs occurred in Kentucky, an increase of 4,053 that was blamed on auto and other manufacturing industries.

Other big increases in claims occurred in Kansas, up 1,764, attributed to higher layoffs in construction, service and finance industries; and Tennessee, with an increase of 1,151, which was attributed to higher layoffs in the computer, electronics, industrial machinery, primary metals and furniture industries.

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