WASHINGTON ? Fewer people likely applied for unemployment benefits last week. While the drop isn't expected to be large enough to signal strong job growth, a downward trend in layoffs should ease fears that the economy is slipping into recession.
Economists forecast that weekly applications dipped 3,000 to a seasonally adjusted 405,000, according to a survey by FactSet. The Labor Department will issue the report at 8:30 a.m. EDT.
Applications are declining slowly and have fallen 14,000, or about 3 percent, in the past month. That's a key piece of evidence that layoffs aren't rising and suggests the economy isn't contracting. Applications are down from an eight-month high of 478,000 in April.
Still, applications would have to fall below 375,000 to signal healthy job growth, a level not seen since February. They have topped 400,000 in 18 of the past 19 weeks.
Fear of another recession took root late last month after the government said the economy expanded at a much slower pace in the first six months of this year than anyone had thought. The economy grew at an annual rate of only 0.8 percent in the first half of the year, the weakest growth since the recession officially ended in June 2009.
The stock market then fell sharply as investors realized even a modest shock could push the economy into a recession. The Dow Jones industrial average has recovered some losses this week, but is still about 11 percent below its July 21 close.
Analysts have been scaling back their forecasts for economic growth this year and next. Economists at JPMorgan Chase project growth of only 0.9 percent in 2011 and 1.7 percent in 2012. Bank of America Merrill Lynch expects only 1.7 percent growth this year and 2.3 percent in 2012.
Growth at those speeds wouldn't spur much hiring and might not even lower the unemployment rate, currently 9.1 percent.
Still, most recent economic reports haven't been so bad. A big jump in demand for autos and airplanes pushed up orders for long-lasting manufactured goods in July, the Commerce Department said Wednesday. Consumers spent more on retail goods last month than in any month since March. And factory output rose in July by the most since Japan's March 11 earthquake, a sign that supply chain disruptions caused by the disaster are fading.
Employers, meanwhile, added 117,000 net jobs in July, roughly double the totals from each of the previous two months.
Still, July's job gains are barely enough to keep up with population growth. At least double that many new jobs are needed to significantly reduce unemployment.
The Federal Reserve this month said that it expects weak growth for the next two years. As a result, it said that it plans to keep its short-term interest rate near zero until at least mid-2013.
Stocks have rallied this week on hopes that Federal Reserve Chairman Ben Bernanke will announce another round of bond purchases on Friday in a highly anticipated speech in Jackson Hole, Wyo. The bond purchases, known as quantitative easing, are designed to keep interest rates low and boost stock prices. But economists think that Bernanke will likely take minor steps, if any.
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