The number of Americans filing claims for unemployment insurance unexpectedly fell last week to the lowest level in three months, a sign the worst of the job cuts may be over. Initial jobless claims decreased by 34,000 to 601,000 in the week ended May 2, the fewest since late January, from a revised 635,000 the prior week, the Labor Department said today in Washington. The number of people collecting benefits climbed to 6.35 million the prior week, the 14th consecutive record, showing companies are still not hiring even as staff reductions abate. Fewer firings reduce the risk that gains in consumer spending will be cut short. Economists surveyed by Bloomberg News predict the payrolls report tomorrow may show unemployment rose to a 25-year high in April, indicating the labor market will be one of the last areas to emerge from the worst recession in at least 50 years. ``The pace of job cuts will slow over the next few months,'' John Herrmann, chief economist at Herrmann Forecasting in Summit, New Jersey, said before the report. ``The economy is moving toward stabilization and recovery in the second half. Consumers' prospects for keeping their job are improving.'' Another Labor report showed worker efficiency rose in the first quarter as the worst recession in at least half a century prompted companies to squeeze more output from remaining staff. Productivity, a measure of employee output per hour, rose at a 0.8 percent annual rate, compared with the 0.6 percent decline reported for the fourth quarter. Labor costs climbed 3.3 percent, compared with a 5.7 percent gain in the previous three months. Initial claims were estimated to rise to 635,000 from 631,000 initially reported for the prior week, according to the median projection of 36 economists in a Bloomberg News survey. Estimates ranged from 616,000 to 650,000. Lower Average The four-week moving average of initial claims, a less volatile measure, dropped to 623,500 from 638,250. The report reinforces other figures this week that showed the job market was contracting at a slower pace. Companies cut payrolls by an estimated 491,000 workers last month, less than economists forecast and the fewest since October, a report from ADP Employer Services showed yesterday. The ADP figures comprise only private employment and don't take into account hiring by government agencies. According to Chicago-based placement firm Challenger, Gray & Christmas Inc., job cuts announced by U.S. employers rose 47 percent in April from a year earlier to 132,590. Today's Labor report showed the unemployment rate among people eligible for benefits, which tends to track the jobless rate, climbed to 4.8 percent in the week ended April 25, the highest since December 1982, from 4.7 percent. These data are reported with a one-week lag. State Breakdown Seventeen states and territories reported an increase in new claims for the week ended April 25, while 36 reported a decrease, led by a 10,800 decline in California that reflected fewer firings in construction and service industries. Initial jobless claims reflect weekly firings and tend to rise as job growth -- measured by the monthly non-farm payrolls report -- slows. The economy has lost about 5.1 million jobs since the recession began in December 2007, making it the worst employment slump of the postwar era. Payrolls probably fell by about 600,000 in April and the jobless rate climbed to 8.9 percent, the highest level since 1983, according to the Bloomberg survey median, ahead of tomorrow's report from Labor. Recent reports show the economic downturn is abating as the manufacturing and service industries contracted at a slower pace in April and consumer confidence improved. Bernanke's View ``We continue to expect economic activity to bottom out, then to turn up later this year,'' Federal Reserve Chairman Ben S. Bernanke said this week in testimony to lawmakers. Still, ``a relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall.'' For some companies, the sales outlook is worsening and additional job cuts were necessary even after staff reductions last year. TRW Automotive Holdings Corp., the world's biggest supplier of vehicle-safety equipment, trimmed its 2009 sales forecast and cut 4,400 jobs in the first quarter following a reduction of 10,000 positions in 2008. ``Taking swift, decisive actions to help mitigate the effects of the downturn remain our top priorities in 2009,'' Chief Executive Officer John Plant said in a statement yesterday.

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