The number of newly laid off workers filing claims for unemployment benefits fell last week for the first time in seven weeks, showing more improvement than had been expected.
The Labor Department reported Thursday that jobless claims dropped to 318,000, down 19,000 from the previous week.
A string of increases in jobless applications had raised concerns that the severe slump in housing was beginning to take its toll on the labor market.
The government will report August jobless figures on Friday. The expectation is that the unemployment rate will hold steady at 4.6 percent with a modest 108,000 new payroll jobs created.
The drop of 19,000 claims last week, on a seasonally adjusted basis, was double the decline that analysts had been expecting. It pushed the total claims level to the lowest point in five weeks.