Weekly applications increased by 8,000 to a seasonally adjusted 365,000, the Labor Department said Thursday. The four-week average, a less volatile measure, fell for the sixth straight week to 365,500, the lowest since March 31.
The decline in the four-week average suggests the job market could be improving a bit. But economists are viewing last month's figures with some caution because the government struggles every July to account for temporary summer shutdowns in the auto industry.
This year was even more complicated because some automakers skipped the shutdowns, resulting in fewer layoffs.
A Labor Department spokesman said the latest figures should be the last affected by the auto shutdown issues.
Even so, some economists saw positive signs in this week's report.
"The net decline from a month ago is encouraging," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said in an email to clients.
Separately, the Commerce Department said businesses placed fewer orders with U.S. factories in June compared to May, another sign that manufacturing is weakening. Factory orders fell 0.5 per cent in June and a measure of business investment plans declined by 1.7 per cent. Demand dropped for heavy machinery, computers and cars.
Weekly unemployment applications are a measure of layoffs. When they consistently fall below 375,000, it suggests hiring is strong enough to pull the unemployment rate down.
Consumers are holding back on spending and the economy is showing other signs of weakening. But the dip in applications shows that companies aren't laying off workers in response, O'Sullivan said.
"Ongoing weakening in the labour market is invariably associated with a rising trend in (applications)," he said.
The seasonal distortions could affect the July employment report, which the Labor Department will release on Friday.
Economists predict employers added 100,000 jobs last month. That would be slightly better than the 75,000 a month average from April through June but still below the healthy 226,000 average in the first three months of the year. The unemployment rate is expected to stay at 8.2 per cent.
The economy isn't growing fast enough to lower the unemployment rate.
Growth slowed to an annual rate of just 1.5 per cent from April through June, down from a 2 per cent rate in the first quarter and a 4.1 per cent rate in the fourth quarter of 2011.
The Federal Reserve cited the slowdown in growth after its two-day policy meeting, which concluded Wednesday. While the Fed took no new action at the meeting, it appeared to signal a growing inclination to take further steps to lift the economy out of its slump.
The overall number of people receiving benefits fell. Almost 6 million people received jobless aid in the week ended July 14, the latest data available. That's about 70,000 fewer than the previous week.
Consumers have grown more cautious about spending, a key reason growth faltered. Manufacturing shank in July for the second straight month, according to a survey by a trade group of purchasing managers.
Europe's economic crisis, which has already dampened demand for U.S. exports, could slow manufacturing further.
Worries have also intensified the U.S. economy will fall off a "fiscal cliff" at the end of the year. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget deal. A recession could follow, Fed Chairman Ben Bernanke has warned.
Many economists believe the Fed could launch another program of buying government bonds and mortgage-backed securities at its September meeting if the economy doesn't show improvement. The goal of the program, known as quantitative easing, would be to drive long-term rates, which are already at record lows, even lower.