The number of Americans filing applications for unemployment benefits dropped sharply for a second straight week, pushing total claims down to the lowest level in two months.

The Labor Department reported that 304,000 newly laid off workers filed claims for jobless benefits last week, a drop of 20,000 from the previous week when claims had fallen by 34,000.

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The two straight weeks of big declines pushed claims down to the lowest level since they were at 300,000 the week of Oct. 14. The recent decreases bolstered the view that even though economic growth has slowed sharply this year, employers are holding on to their existing workforce in anticipation of an economic rebound.

Labor Department analysts cautioned that it was difficult to get a clear reading on layoff activity in the period between Thanksgiving and New Year's Day because the various holidays disrupt the normal pattern for filing claims.

Still, the big decline of 20,000 applications was far better than the drop of 4,000 that economists had been expecting. The claims report was just the most recent indication that the labor market is holding up well in the face of the current economic slowdown.

The government reported last week that employers added 132,000 jobs to their payrolls in November after adding just 79,000 jobs in October. The gain occurred in spite of the fact that construction companies slashed 29,000 positions last month, reflecting the big downturn in housing this year, while manufacturing lost jobs for a fifth consecutive month as the nation's automakers continued to struggle.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said he still looked for the weekly jobs claims to start creeping higher in coming weeks, reflecting the slowing economy.

The overall economy, which started the year at a sizzling 5.6 percent growth rate, slowed to sluggish 2.2 percent rate in the summer.

While there had been concerns that the deepening troubles in housing might push the country into a full-blown recession, those fears have eased recently with the expectation that the retreat in gasoline prices from record highs above $3 per gallon will give consumers more money to spend on other items.

Reports this week that the trade deficit shrank sharply in October and retail sales rebounded in November have prompted many economists to boost their forecasts for fourth quarter growth by about one-half percentage point to around 2.5 percent.

For the week ending Dec. 2, there were 47 states and territories reporting increases in jobless claims applications and only six had declines.

The increases were led by North Carolina, which reported a jump of 16,509, reflecting higher layoffs in the construction, textile and furniture industries.

Georgia reported an increase of 14,316 claims applications, a rise that was blamed on higher layoffs in the textile industry, followed by an increase of 12,782 claims applications in Pennsylvania, reflecting more layoffs in construction and service industries.

States reporting the biggest drop in claims applications were Texas, down 5,607; Wisconsin, down 4,960, and Arkansas, down 1,137.

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