updated 7/19/2007 11:37:05 AM ET 2007-07-19T15:37:05

The number of laid off workers filing applications for unemployment benefits dropped last week to the lowest level in two months.

Major Market Indices

The Labor Department reported Thursday that jobless claims fell to 301,000 last week, a decline of 8,000 from the previous week. It marked the second straight weekly improvement and pushed total claims down to the lowest point since the week of May 12.

Analysts said the slowing pace of layoffs provided further evidence that the labor market has so far been able to withstand the serious slump in housing.

The unemployment rate held steady at 4.5 percent in June as businesses added 132,000 workers. Economists have been surprised that the labor market has held up as well as it has in the face of a yearlong economic slowdown that pushed overall growth down to a lackluster 0.7 percent in the first three months of the year, the poorest showing in more than four years.

Analysts believe the economy rebounded in the just-completed April-June quarter to a growth rate of 3 percent or better, but some of that strength came from temporary factors with growth in the second half of the year expected to slow to around 2.5 percent.

That could send unemployment edging up. The Federal Reserve, in an economic forecast presented to Congress this week by Chairman Ben Bernanke, forecast that the jobless rate could rise as high as 4.75 percent by the end of this year, still relatively low by historical standards.

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