Aug. 17 (Bloomberg) -- The number of U.S. workers filing first-time applications for state jobless benefits fell last week, evidence demand is strong enough to encourage companies to retain workers.

Initial jobless claims decreased by 10,000 to 312,000 in the week that ended Aug. 12, the Labor Department said today in Washington. The four-week moving average, a less volatile measure, rose to 311,250 from 309,500.

Firings aren't picking up even as slower growth and higher energy costs prompt companies to add fewer jobs. Job and income growth is needed to keep consumer spending from stumbling as Federal Reserve policy makers nudge the economy to a slower pace of growth and keep inflation from flaring.

``The economy is slowing but it's still growing strong enough to generate demand for labor,'' Doug Porter, deputy chief economist at BMO Capital Markets in Toronto, said before the report.

Economists had forecast initial jobless claims would fall to 315,000 from the 319,000 initially reported for the prior week, according to the median estimate in a Bloomberg News survey. Estimates ranged from 310,000 to 322,000.

An increase in the total number of people receiving unemployment benefits is another sign hiring is slowing. Total benefit rolls rose to 2.507 million in the week that ended Aug. 5, the highest since February, from 2.473 million in the prior week. The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, held at 1.9 percent. These data are reported with a one-week lag.

Less Hiring

``Claims numbers have remained in check, but just because companies are firing fewer people doesn't mean they're hiring more,'' Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina, said before the report.

Thirty-seven states and territories reported an increase in new claims, while 16 reported a decrease, the Labor Department said.

The claims report coincides with the week the government surveys businesses to calculate the August payrolls figures.

Companies so far this year haven't been hiring at the same pace as last year.

U.S. employers added 113,000 jobs in July and the unemployment rate rose, reinforcing signs the economy is slowing and giving the Fed latitude last week to suspend its two-year campaign of interest rate increases. Monthly payroll growth has averaged about 140,000 this year, down from an average 165,000 in 2005.

Labor Force

With fewer people entering the labor force than in years past, the number of new jobs needed to keep the unemployment rate constant is now about 130,000 per month, Fed Chairman Ben S. Bernanke said in testimony to Congress on July 19. That figure used to range as high as 150,000, economists say.

Jobless claims, which are reported weekly and reflect firings, usually rise as job growth, measured by the monthly non- farm payrolls report, falls. That relationship has held this year, economists said.

The economy will expand at an average annual rate of 2.7 percent this quarter and 2.9 percent in the fourth, according to the median forecast of 51 economists in a Philadelphia Fed survey released this week. That compares with a 2.5 percent pace in the second quarter and a 5.6 percent rate the first three months of the year.

Industrial production in the U.S. grew less than forecast in July as factories churned out fewer automobiles and parts, a Fed report showed yesterday. At the same time, the proportion of industrial capacity in use rose to the highest since June 2000.

Capacity Use

The Fed said on Aug. 8 that while economic growth has moderated, ``high levels of resource utilization,'' which includes factory capacity, raw materials and labor, may sustain inflation pressures.

Worker productivity in the U.S. slowed last quarter and labor costs accelerated at the fastest pace since the end of 2004, suggesting inflation risks persisted, the Labor Department reported earlier this month.

Companies including Sysco Corp., North America's largest distributor of food to restaurants, are hiring as the economy slows. Sysco increased its sales force by 6.2 percent this year and plans to add 7 percent in fiscal 2007, said Richard Schnieders, chief executive officer of the Houston-based company.

``We will add 700 more salespeople next year,'' Schnieders said in an Aug. 14 interview. ``We're going to continue adding salespeople where that makes sense and the industry is certainly continuing to grow, so it works for us.''

To contact the reporter on this story: Joe Richter in Washington Jrichter1@bloomberg.net

Last Updated: August 17, 2006 08:30 EDT