July 9 (Bloomberg) -- The number of Americans filing claims for unemployment benefits fell last week to the lowest since January, as early automotive plant closures altered the timing of layoffs that typically happen at this time of year.

Initial jobless claims fell by 52,000 to 565,000, a lower level than forecast, in the week ended July 4, from a revised 617,000 the prior week, the Labor Department said today in Washington. Meanwhile, the number of people collecting unemployment insurance jumped to a record in the prior week.

General Motors Corp. and Chrysler LLC closed some plants in May and June, earlier than the normal summer shutdown period for retooling factories, as they entered bankruptcy, said Abiel Reinhart, an economist at JPMorgan Chase & Co. in New York. As a result, auto workers filed applications for jobless benefits earlier than usual, pushing down claims for July.

“We’ll see some fundamental improvement in the numbers once the seasonal distortions wash out,” said Bill Jordan, an economist at Ried, Thunberg & Co. in Westport, Connecticut, who had forecast initial claims would drop to 570,000. “The labor market is not as bad as before, but it’s not going to be good. It will be a drag on consumption for a while.”

Employers are cutting jobs at a slower rate than earlier this year after slashing about 6.5 million positions since the recession began in December 2007, the most of any downturn since World War II. Even so, companies aren’t yet hiring and economists say the jobless rate will keep rising, restraining consumer spending and muting any recovery.

Wholesale Inventories

A separate government report today showed that inventories at wholesalers fell in May for a ninth straight month as an increase in sales helped distributors get rid of some of their excess supply.

The 0.8 percent decrease in stockpiles followed a revised 1.3 percent drop in April, the Commerce Department said. Wholesale inventories have had the longest series of declines since June 2001 through February 2002.

Jobless claims were estimated to fall to 603,000 from 614,000 initially reported for the prior week, according to the median projection of 40 economists in a Bloomberg News survey. Estimates ranged from 570,000 to 625,000.

“While fewer people are losing their jobs, it is still as hard as it’s been to find a job,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. “Businesses remain very cautious, not only in their hiring but also in their desire to have capital tied up in inventories.”

Weekly jobless claims tend to be volatile at this time of the year, when automakers idle workers while they re-equip factories to build new models.

Seasonal Adjustment

A Labor Department spokesman today said because of the so- called seasonal adjustment factors the government expected a big jump in claims last week and the current week, followed by big declines in the following two weeks.

The four-week moving average of initial claims, a less volatile measure, fell to 606,000 last week from 616,000.

Continuing claims soared by 159,000, the most since early May, in the week ended June 27 to 6.88 million.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 5.1 percent in the week ended June 27, from 5 percent the prior week.

Twenty-one states and territories reported an increase in new claims for the week ended June 27, while 32 reported a decrease. These data are reported with a one-week lag.

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

Jobless Rate Climbs

Payrolls in June fell more than economists forecast and the unemployment rate reached 9.5 percent, the highest since 1983, Labor said last week.

Cost-cutting continues in other industries, too. Tellabs Inc., the maker of networking equipment, this week said it is scrapping about 150 jobs.

Dow Chemical Co., the largest U.S. chemical maker, said July 1 it will permanently close three Louisiana factories and take a second-quarter charge of about $700 million that includes the elimination of 2,500 jobs, following the acquisition of Rohm & Haas Co.

Recent reports from the Institute for Supply Management indicated that manufacturing and service industries in the U.S. shrank at a slower pace in June, in each case helped by a gain in ISM’s gauges of employment.

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

Last Updated: July 9, 2009 11:31 EDT