By Lucia Mutikani
WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to a further strengthening of labor market conditions.
Initial claims for state unemployment benefits decreased by 14,000 to a seasonally adjusted 289,000 for the week ended Aug. 2, the Labor Department said on Thursday.
The prior week's claims were revised to show 1,000 more applications received than previously reported.
Economists polled by Reuters had forecast claims rising to 305,000 for the week ended Aug. 2. Volatility related to the summer automobile plant shutdowns for retooling pushed claims to a 14-year low in July.
Most of that volatility has worked its way through the data. The four-week average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 4,000 to 293,500, the lowest level since February 2006.
A Labor Department analyst said there were no special factors influencing the state level data.
"The underlying trend seems to be improvement in payrolls. The slower pace of claims would be consistent with that," said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut.
U.S. stock index futures held gains, while prices of U.S. Treasuries turned flat, paring earlier gains, after the claims data. The U.S. dollar was trading higher against the euro.
Claims are now at levels where the scope for further declines is limited as the labor market normalizes. As such, hiring will need to pick up significantly for job growth to accelerate.
The slow pace of layoffs as well as steady hiring are helping to strengthen labor market conditions, fanning speculation of an early interest rate increase from the Federal Reserve.
But with the ranks of the long-term unemployed, discouraged job seekers and part-time workers still large, the U.S. central bank has given little indication it is in a hurry to lift its benchmark interest rate, which it has kept near zero since December 2008.
Fed officials last month acknowledged the improvement in labor market conditions, but said "significant underutilization of labor resources" remained.
Nonfarm payrolls increased by 209,000 in July, marking the sixth straight month that employment expanded by more than 200,000, a stretch last seen in 1997. The unemployment rate rose one-tenth of a percentage point to 6.2 percent as more people entered the labor force in search of work.
Thursday's jobless claims report showed the number of people still receiving benefits after an initial week of aid dropped by 24,000 to 2.52 million in the week ended July 26.
The unemployment rate for people receiving jobless benefits was 1.9 percent for the fourth week in a row.
(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Paul Simao)