June 5 (Bloomberg) -- The number of Americans filing first- time jobless claims unexpectedly fell last week, possibly reflecting the closure of government offices for the Memorial Day holiday.

Initial jobless claims decreased by 18,000 to 357,000 in the week that ended May 31, the lowest level in more than a month, the Labor Department said today in Washington. While the figures are adjusted for seasonal variations, holidays make it more difficult for Labor to estimate the changes.

The level of claims indicates the job market is weakening without collapsing as deteriorating demand has led employers to pull back on hiring rather than carry out mass firings of the scale seen in past recessions. Rising joblessness, falling home values and higher fuel costs raise the risk that consumer spending will falter.

``Because the week included a holiday, there is always the possibility of seasonal-adjustment problems,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``It still looks consistent with outright declines in payrolls.''

Treasuries fell, pushing yields higher. The benchmark 10- year note yielded 4.02 percent as of 9:42 a.m. in New York, up from 3.98 percent late yesterday. Stocks were higher.

Payroll Report

Today's figures come a day before the government's payroll report, which may show the economy lost 60,000 jobs in May, a fifth straight decline, according to the median forecast in a Bloomberg survey. The jobless rate is forecast to rise to 5.1 percent from 5 percent in April.

Claims in the prior week were revised up to 375,000 from a previously estimated 372,000. The median projection of 39 economists in a Bloomberg News survey called for a rise in applications last week to 375,000. Estimates ranged from 365,000 to 380,000.

During the last recession in 2001, about 415,000 workers on average filed jobless claims per week.

The four-week moving average, a less volatile measure, fell to 368,500 from 371,250, today's report showed.

Continuing Claims

The number of people continuing to collect jobless benefits decreased to 3.093 million in the week ended May 24, from 3.109 million the prior week that was the highest in more than four years. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 2.3 percent. These data are reported with a one-week lag.

Twenty-two states and territories reported an increase in new claims, while 31 reported a decrease.

Initial jobless claims reflect weekly firings and tend to rise as job growth -- measured by the monthly non-farm payrolls report -- slows.

So far this year, weekly claims have averaged 358,000 compared with an average 321,000 in 2007, when the economy generated 91,000 new jobs on average each month.

Federal Reserve Chairman Ben S. Bernanke this week said financial-market conditions ``remain strained,'' and consumers face ``significant headwinds'' from declining home prices, a weaker labor market, stricter lending standards and higher energy costs.

The second quarter is ``likely to be relatively weak,'' Bernanke said in his address to the International Monetary Conference in Barcelona, Spain. The second half of this year may have ``somewhat better economic conditions,'' he said.

Housing-Related Companies

Housing-related companies continue to trim staff. First American Corp., the largest U.S. title insurer, said yesterday it cut 200 jobs in May and expects a ``challenging'' market through the end of the year.

Interest rates are ``stubbornly high'' and are preventing a rebound in home sales and title orders, Chief Operating Officer Dennis Gilmore said at a conference. ``I can't predict when that market will turn.''

Continental Airlines Inc. said today it will cut 3,000 jobs and shrink its fleet by 67 planes because of record fuel expenses. The cuts go beyond an April reduction and follow fare increases that failed to cover rising prices.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

Last Updated: June 5, 2008 09:46 EDT