Weekly applications for unemployment benefits declined 2,000 to a seasonally adjusted 402,000, the Labor Department said Thursday. That's the fourth drop in six weeks.
Still, the four-week average, a less volatile measure, rose to 405,500. The average had fallen to a six-month low two weeks ago.
Despite the recent declines, applications are stuck above 400,000, where they have been for all but two weeks since March. Applications need to fall consistently below 375,000 to signal sustainable job growth. They haven't been below that level since February.
The report shows that layoffs have stabilized at the lowest levels since the spring.
That's "a very welcome development in the context of the steep decline in business confidence," said Ian Shepherdson, an economist at High Frequency Economics, in a note to clients.
"Businesses are not happy about the economy, but neither are they in panic mode," he said.
Also Thursday, the government said the economy grew modestly over the summer after nearly stalling in the first six months of the year. Growth in the July-September quarter was lifted by stronger consumer spending and business investment.
The economy expanded at an annual rate of 2.5 percent. That's nearly double the 1.3 percent growth in the April-June quarter. And it's a vast improvement over the 0.9 percent growth for the entire first half of the year.
Still, while 2.5 percent growth is enough to ease recession fears, it's far below what's needed to lower painfully high unemployment. The rate has been stuck at 9.1 percent for three straight months. Analysts project similar growth for the October-December quarter.
The economy would need to expand by about 4.5 percent for a year to reduce the unemployment rate by a full percentage point. The rate has been near 9 percent for more than 2 1/2 years, the longest such stretch since the Great Depression.
The number of people collecting benefits fell sharply to the lowest level in more than three years. That's a positive sign that hiring could be improving. The unemployment benefit rolls dropped 96,000 to 3.65 million.
That doesn't include several million additional people who are receiving benefits under an extended benefit program put in place during the recession and paid for by the federal government.
All told, 6.7 million people received benefits in the week ending Oct. 8, the latest data available. That's down about 15,000 from the previous week.
Employers have added an average of only 72,000 jobs a month in the past five months. That's below the 100,000 per month needed just to keep up with population growth. And it's down from an average of 180,000 in the first four months of this year.
In September, the economy generated 103,000 net jobs.
There was some positive economic news Wednesday. Companies ordered more heavy machinery, computers and other long-lasting factory goods last month, the Commerce Department said.
Orders for those types of capital goods rose 2.4 percent, the biggest gain in six months. That suggests companies are willing to spend and invest, even with growth slow and consumer confidence at dismal levels.
Sales of new homes also rose in September, the department said in a separate report, though mostly because builders cut prices. Sales are still at about half the level that would be consistent with a healthy economy. Most analysts say the battered housing sector is years away from a turnaround.
The U.S. economy could also benefit from the deal European leaders clinched Thursday to have banks take 50 percent losses on Greek debt and raise new capital to protect against defaults on sovereign debt.