The number of Americans filing first-time claims for unemployment benefits dropped last week to the lowest level in nine months, indicating the improving economy is leading to a slowdown in firings. Applications fell by 10,000 to 514,000 in the week ended Oct. 10, lower than forecast, from a revised 524,000 the week before, Labor Department data showed today in Washington. The total number of people collecting unemployment insurance also decreased. Fewer dismissals don’t mean that companies will boost hiring, signaling the jobless rate is likely to keep climbing in the early stages of the economic rebound. Mounting joblessness is among reasons Federal Reserve policy makers, who project the recovery will be “restrained,” are likely to keep interest rates low for months to come. “What we expect for the most part is the downward trend to continue,” Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, said before the report. “We will probably have more sustained growth in the labor market starting in early 2010. From there we will find a peak in the unemployment rate and ultimately create jobs.” Claims were forecast to fall to 520,000 from the 521,000 originally reported for the previous week, according to the median of 41 economists’ forecasts in a Bloomberg News survey. Estimates ranged from 490,000 to 550,000. Less Inflation The cost of living in the U.S. rose at a slower pace in September, showing inflation will not be a threat as the economy emerges from the worst recession since the Great Depression, separate Labor Department figures also showed. The 0.2 percent gain in the consumer-price index followed a 0.4 percent increase in August, the Labor Department said today in Washington. Excluding food and energy costs, the so-called core index also increased 0.2 percent. The jobless claims report showed the four-week moving average of initial applications, a less volatile measure, decreased to 531,500 last week from 540,500. Continuing claims fell by 75,000 in the week ended Oct. 3 to 5.99 million, the fewest since March. The number of people who have used up their benefits and are now collecting extended payments increased to 3.8 million in the week ended Sept. 26 from 3.79 million the prior week. Congress is debating plans to continue extending benefits as the initial program is about to expire. Senate Majority Leader Harry Reid, a Nevada Democrat, announced a compromise proposal on Oct. 8 that would extend aid to all states for at least 14 weeks. The hardest-hit states, with unemployment rates topping 8.5 percent, would get a 20-week extension. Less Joblessness The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 4.5 percent in the week ended Oct. 3 from 4.6 percent the prior week, today’s report showed. Thirty-seven states and territories reported an increase in claims, while 16 showed 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. The U.S. has lost 7.2 million jobs since the recession began in December 2007, including a 263,000 drop in September payrolls. Even with the continue job losses, the economy probably returned to growth in the third quarter and will continue to expand through 2010, economists surveyed by Bloomberg News earlier this month projected. The economy grew at a 3.2 percent pace in the third quarter, helped by a surge in auto demand, according to the survey median. Fed Projections Fed staff projected “only a slow improvement in labor markets, with the unemployment rate moving down to about 9.25 percent by the end of 2010,” according to minutes of the Sept. 22-23 Federal Open Market Committee meeting released yesterday. The minutes also showed policy makers “agreed” reports suggested economic activity had “picked up” though the recovery would probably be “quite restrained.” Government workers are no longer immune from job cuts as state and local budget deficits surge. The Chicago Transit Authority earlier this week proposed bus and rail service cuts as well as fare increases to close a $300 million gap. The agency will cut more than 1,000 union positions as well as 100 non-union administrative jobs, CTA President Richard Rodriguez said at a news conference on Oct. 12. Lawson Software Inc., a Minnesota maker of business- management software, said Oct. 1 it plans to cut 75 consulting jobs to cope with the economic slump.

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