May 8 (Bloomberg) -- Initial jobless claims in the U.S. dropped last week to a level that still signaled businesses were trimming labor costs.

The number of Americans filing applications for the first time fell more than forecast to 365,000, from a revised 383,000 the prior week, the Labor Department said today. The level of continuing claims declined by 10,000 to 3.02 million for the week ended April 26.

Companies are trimming staff as the worst housing slump in more than a quarter century weakens home prices, consumer and corporate spending and economic growth. The government said last week that the U.S. lost jobs for a fourth straight month.

``The labor market is likely to remain sluggish for some time, the unemployment rate is likely to drift up further from here,'' said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York.

Economists forecast claims would fall to 370,000, from a previously reported 380,000 a week earlier, according to the median of 41 projections in a Bloomberg News survey. Estimates ranged from 350,000 to 390,000.

The four-week moving average for initial claims, a less volatile measure, rose to 367,000 from 364,500. An average of 3 million workers received jobless benefits over the last four weeks, the highest since May 2004.

The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, held at 2.3 percent. Twenty-one states and territories reported an increase in new claims, while 32 had a decrease. These data are reported with a one-week lag.

Higher Average

Initial jobless claims have averaged 353,300 so far this year, compared with 321,000 a week for all of 2007, when the economy created 91,000 new jobs each month on average.

The U.S. lost 20,000 jobs in April, the fourth straight decline, the government said May 2. The report signaled the labor market, while weak, was not as poor as in previous economic downturns.

Federal Reserve policy makers last week lowered the benchmark overnight lending rate between banks by a quarter percentage point, to 2 percent, in a bid to revive the economy. The government also started sending out tax rebate checks that were part of its fiscal stimulus plan.

``Household and business spending has been subdued and labor markets have softened further,'' the central bank said April 30 in announcing its decision. It also said that the easing that has taken place since last year, along with efforts to stabilize financial markets ``should help to promote growth over time.''

Slower Growth

The U.S. economy expanded at a 0.6 percent pace in the first quarter, the same as the last three months of the year, the Commerce Department said April 30. Growth in the six months through March the lowest since the economy contracted in 2001.

The economy is ``sliding into a recession,'' Harvard University economist Martin Feldstein said this week in a Bloomberg Television interview. ``Things have gotten a little better in the last month or so but still a lot of negatives out there.'' Since the beginning of the year, ``just about every indicator is down,'' he said.

Feldstein is also president of the National Bureau of Economic Research and a member of the group's committee that charts the American business cycle. The Cambridge, Massachusetts- based NBER defines recessions as a ``significant'' decrease in activity over a sustained period of time. The declines would be visible in gross domestic product, payrolls, production, sales and incomes.

Finance Jobs

Financial services companies have been especially hard-hit in this economic downturn. In the past 10 months, the world's biggest banks and securities firms have cut 65,000 jobs, according to Bloomberg data.

Morgan Stanley, the second-biggest U.S. securities firm, said May 5 it plans to reduce headcount by as much as 5 percent in the next five months. The cuts will come mainly in the U.S., spokesman Mark Lake said, and are in addition to the approximately 3,000 positions the company has cut since October.

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

Last Updated: May 8, 2008 08:43 EDT