WASHINGTON – The number of people signing up for unemployment benefits dropped last week to the lowest level in two months, an encouraging sign that companies aren’t resorting to deeper layoffs even as the economy has lost momentum.

The Labor Department reported Thursday that new claims for unemployment aid plunged by a seasonally adjusted 27,000 to 451,000. Economists had predicted a much smaller decline of just 2,000.

In a second hopeful sign, the government said the trade deficit narrowed significantly in July as exports climbed to the highest level in nearly two years. The narrower gap reflected big gains in exports of U.S.-made airplanes and other manufactured goods. Imports declined.

Together, the two reports eased fears that the economy might slide back into recession.

“At the moment, we can rule out a double-dip for the economy,” said Chris Rupkey, chief economist at Bank of Tokyo-Mitsubishi. “The economy is not out of the woods with today’s data, but things look better than they have in several weeks, and there is no danger of a new downturn in activity.”

Concerns about a possible new recession had arisen after a batch of downbeat reports in August. For example, new applications for jobless benefits shot past the half-million mark in mid-August, the highest level since November. Since that spike, though, they have drifted lower. New filings for benefits are now at their lowest level since July 10.

Meanwhile, the four-week average of new claims, which smooths out weekly fluctuations, also fell last week, dropping by 9,250 to 477,750. So did the number of people continuing to draw unemployment aid.

Even with the latest decline, new filings for jobless benefits are still much higher than they would be if the economy were healthy. When the economy is growing strongly and companies are hiring, requests for unemployment benefits fall below 400,000.

As for the trade deficit, it fell 14 percent to $42.8 billion in July, the Commerce Department said. That was much lower than economists had forecast. The lower trade deficit should give a boost to overall economic growth.

On Wall Street, stocks extended their September rally.

The Dow Jones industrial average rose 28.23, or 0.3 percent, to close at 10,415.24.

The Standard & Poor’s 500 index rose 5.31, or 0.5 percent, to 1,104.18, while the Nasdaq composite index rose 7.33, or 0.3 percent, to 2,236.20.

Rising stocks outpaced those that fell three to two on the New York Stock Exchange, where volume was extremely low at 840 million shares. Bond prices fell, sending the yield on the 10-year Treasury note up to 2.76 percent from 2.66 percent late Wednesday. That yield helps set interest rates on mortgages and other consumer loans.

The Dow had already jumped 3.7 percent in September heading into trading Thursday. Stocks have climbed all but one day so far this month. Major indexes took a pause from the recent rally on Tuesday when worries about European government debt problems flared up early in the week.

 

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