The number of Americans filing new claims for jobless benefits fell last week to near a four-year low.
However an unusual pattern for summer factory shutdowns kept hopes in check that the weak labor market was improving.
Other data today showed new orders for long-lasting US manufactured goods rose in June although a gauge of planned business spending plans dropped, pointing to a slowdown in factory activity.
Economists said the two economic reports did little to change the view that the economy was stuck in a rough patch.
A third report showed contracts to buy previously owned US homes unexpectedly fell in June, a worrisome sign for the housing market.
Job creation slowed dramatically during the second quarter as the economy suffered from fears over europe's debt crisis and a planned belt tightening by the US government.
Last week, initial claims for state unemployment benefits dropped 35,000 to a seasonally adjusted 353,000, the Labor Department said, near a four-year low touched earlier this month. That was a much sharper drop than economists expected.
This year, automakers are carrying out fewer temporary plant shutdowns, throwing off the model the department uses to smooth the data for typical seasonal patterns. One measure that tries to smooth out this volatility, the four-week moving average, fell 8,750 last week to 367,250.
US stocks rose sharply after remarks by Europe's central bank chief about protecting the euro zone from collapse helped reassure a market already expecting the US Federal Reserve to step up stimulus efforts. Yields on government debt also rose.
Fed Chairman Ben Bernanke told lawmakers last week that the US central bank, which in June expanded its efforts to spur the economy, would take additional action if officials concluded no progress was being made towards higher levels of employment.
Little action, if any, is expected at the Fed's policy review next Tuesday and Wednesday, although some economists think the Fed could tell investors it will keep interest rates low for even longer than currently pledged.
The Labor Department release its employment report for July on August 3, and it is expected to show a still-tepid rate of job growth.
In a separate report, the Commerce Department said durable good orders increased 1.6% in June, but this was mostly because demand for aircraft surged.
Details of the report were generally weak, with declines in new orders for computers, electrical equipment and appliances and machinery. Factoring out transportation, new orders dropped 1.1%.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 1.4%.
Manufacturers are feeling the pinch as the global economy slows.
United Technologies Corp reported a drop in quarterly sales on weaker global demand for its elevators and jet engine parts, while Dow Chemical Co reported lower-than-expected profits on a plunge in dem and for chlorine, plastics and electronic parts.
Shipments of non-defense capital goods orders excluding aircraft, used to calculate equipment and software spending in the gross domestic product report, increased 1.2% in June. The increase suggests spending on equipment and software grew in the second quarter, but probably nowhere near levels in 2011.
The government is expected to report on Friday that the economy grew at a 1.5% annual rate in the second quarter, according to a Reuters survey, slowing from the 1.9% rate in the prior three months.
Housing has been a relative bright spot in the US economy this year, but the National Association of Realtors said its Pending Home Sales Index, based on contracts signed in June, slipped 1.4% during the month.
Economists have been optimistic that the housing sector, which collapsed during the 2007-2009 recession, was showing signs of life, as prices have appeared to stabilize.
PulteGroup Inc, the nation's second largest home builder, reported a sharp jump in new orders as home buyers took advantage of rock-bottom interest rates.
The data on pending home sales, however, appeared to dampen some of the optimism over a housing recovery.
