Jobless-Claims Picture Is Best in 7 Months : Economy: First-time requests for unemployment benefits fall to 403,000 in the week ended May 16.

The number of unemployed Americans filing initial claims for jobless benefits fell to a seven-month low in mid-May, the government said Thursday in a report that suggests that the labor market is regaining vigor.

First-time claims fell to 403,000 in the week that ended May 16 from 407,000 the prior week, the Labor Department said. It was the lowest level of claims since the week of Oct. 5, when they reached 401,000.

The four-week average for initial claims, considered a more accurate barometer of job trends, also continued its gradual decline of recent weeks. It fell to 412,500 from 412,750 in the prior four-week period.

The figures were better than Wall Street economists expected. They had forecast 408,000 claims.

“The worst of the job layoffs is behind us, and we should have some pickup in hiring in the second half of the year,” said Lynn Reaser, senior vice president at First Interstate Bancorp in Los Angeles.

California saw the strongest improvement of all the states, with a 4,992 decline in new claims from a week earlier, partly due to a pickup in agricultural hiring. The drop came despite about 1,400 people seeking benefits after losing their jobs in the Los Angeles riots, it said.

The jobless claims data capped a week of encouraging reports that point to a gradual strengthening of the economy.

Consumer confidence rose in May for the third straight month. Car sales jumped a surprising 9.3% in mid-May, and orders for long-lasting durable goods, vital to job growth and recovery, climbed in April for the fourth consecutive month.

The Bush Administration heralded the reports as an optimistic sign for an economy struggling to emerge from a nearly two-year slump.

“I am encouraged by the steady and clear improvement that is evident in the economy,” Labor Secretary Lynn Martin said.

Nicholas Perna, chief economist at the Connecticut bank Shawmut National Corp., said he believes that the upbeat data will start to fuel recovery.

“You can’t underestimate the importance of jobs data,” he said. “It is jobs that drive income. Income drives car sales. Jobs drive consumer confidence.”