Fewer Americans filed claims for unemployment insurance payments over the past month, indicating the labor market is improving.

The average number of applications for jobless benefits over the past four weeks dropped to 410,750, the lowest level since July 2008, Labor Department figures showed today in Washington. Claims for the week ended Jan. 1 rose by 18,000 to 409,000, in line with the median forecast of economists surveyed by Bloomberg News.

Firings have been waning in recent weeks, a necessary step toward gains in hiring that will help boost consumer spending, which accounts for 70 percent of the economy. A report tomorrow is projected to show employers added to payrolls in December for a third month as the U.S. expansion gained speed.

“The downward trend in initial jobless claims has become more pronounced,” Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. This “should be an indication that hiring is accelerating.”

The median forecast, based on predictions of 36 economists in a Bloomberg survey, called for claims to rise to 408,000 last week from a two-year low of 388,000 the prior week. Estimates ranged from 360,000 to 450,000. The Labor Department today revised the prior week’s figure to 391,000.

A Labor Department spokesman said there was nothing unusual in last week’s figures as the report was released. The second week in January usually marks the high point in claims before they are seasonally adjusted, he said, reflecting dismissals of temporary workers following the holidays.

Less Volatile

Economists track the four-week average because it’s a less volatile measure than the weekly figures and gives a better indication of the overall trend.

The number of people continuing to receive jobless benefits fell by 47,000 in the week ended Dec. 25 to 4.1 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 23,000 to 4.51 million in the week ended Dec. 18.

The unemployment rate among people eligible for benefits held at 3.3 percent in the week ended Dec. 25.

Twenty states and territories reported a decline in claims, while 33 reported an increase. These data are reported with a one-week lag.

California showed the biggest jump in applications, a 15,972 increase, and cited increased firings at transportation, construction and manufacturing firms.

Firing, Hiring

Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates. That relationship has broken down in recent months as some companies continue to cut staff while others expand, indicating an uneven rebound.

“Conditions in the labor market appeared to be improving on balance,” Federal Reserve officials said in minutes of their Dec. 14 meeting released this week. Even so, “the pace of hiring was still sluggish,” and the jobless rate “stayed at a high level,” they said.

Companies taking on workers include Goodlettsville, Tennessee-based Dollar General Corp., the biggest of the U.S. dollar discount stores, which plans to add 6,000 jobs as it opens 625 stores this year.

Some are still paring staff. AK Steel Holding Corp. the third-largest U.S. steelmaker, on Dec. 28 said it is closing a Kentucky coke plant to reduce costs. The shutdown of the Ashland facility, which has 263 employees, will be completed early in the second quarter, West Chester, Ohio-based AK Steel said.

High Expectations

Figures from ADP Employer Services yesterday showed companies increased employment by 297,000 in December, the most since records began in 2001 and exceeding the highest projection in a Bloomberg survey.

Monthly payroll figures, due tomorrow from the Labor Department, may show employers added 150,000 jobs in December following a gain of 39,000 in November. The unemployment rate may have fallen to 9.7 percent, the first decline in six months.

President Barack Obama in December signed into law an $858 billion bill extending for two years Bush-era tax cuts for all income levels. It also continues expanded jobless insurance benefits to the long-term unemployed for 13 months and reduces payroll taxes for workers by two percentage points during 2011.