Initial U.S. jobless claims fell last week to the lowest level since July 2008, a sign that the labor market is improving heading into 2011.

First-time filings for unemployment insurance decreased by 34,000 to 388,000 in the week ended Dec. 25, compared with the median forecast of 415,000 in a Bloomberg News survey, Labor Department figures showed today in Washington. There were no special factors behind the drop, an official at the agency said as the data were released.

A decline in firings is a necessary step toward the increased hiring needed to spur consumer spending, which accounts for 70 percent of the economy. At the same time, Federal Reserve officials say economic growth is falling short of the rate needed to reduce joblessness that’s hovering near 10 percent.

“The recovery is in good shape,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. A drop in claims “points to additional progress, though sluggish, being made in the labor market.”

Estimates of initial claims in the Bloomberg survey of 28 economists ranged from 395,000 to 430,000. The Labor Department revised the prior week’s figures to 422,000 from a previously reported 420,000.

While the latest reporting week included the Christmas holiday, leaving jobless Americans with one less day to file for benefits, the Labor Department spokesman said there was “nothing unusual” in the data. The level of initial filings was the lowest since the week ended July 12, 2008.

Four-Week Average

The four-week moving average, a less-volatile measure, dropped to 414,000 last week, the lowest since July 26, 2008, from 426,500, today’s data showed.

The number of people continuing to receive jobless benefits rose by 57,000 in the week ended Dec. 18 to 4.13 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 151,500 to 4.53 million in the week ended Dec. 11.

President Barack Obama on Dec. 17 signed into law an $858 billion bill extending for two years Bush-era tax cuts for all income levels. The measure 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.

The unemployment rate among people eligible for benefits rose to 3.3 percent in the week ended Dec. 18, from 3.2 percent in the prior week, today’s report showed.

States Reporting

Thirty-three states and territories reported an increase in claims, while 20 reported a decline. These data are reported with a one-week lag.

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 and others expand, indicating an uneven recovery.

“The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment,” Fed officials said in a statement after their policy meeting on Dec. 14.

Businesses that are adding workers include Motorola Inc., the Schaumburg, Illinois-based maker of mobile phones.

“We have been” hiring, co-Chief Executive Officer Greg Brown said in a Bloomberg Television interview on Dec. 15. Even so, “we need to create jobs faster.”