WASHINGTON (Bloomberg) — Claims for jobless benefits unexpectedly dropped last week to a three-month low, a sign the US labour market may be starting to mend.

Initial jobless claims decreased by 21,000 to 434,000 in the week ended October 23, the lowest since early July when fewer auto plants than normal closed for retooling,

Labor Department figures showed yesterday in Washington. The total number of people receiving unemployment insurance dropped to a two-year low, while those getting extended payments also fell.

Consumer spending, which accounts for about 70 percent of the economy, is beginning to stir and may give employers reason to add workers ahead of the holiday shopping season. Fewer firings are an initial step toward more hiring as companies such as Ford Motor Co. see sales improve.

"Certainly these are encouraging numbers," said Brian Jones, senior economist at Societe Generale SA in New York, who forecast claims would drop to 430,000. At the same time, he said, "given other labour-market readings, you want to be hesitant about saying we've turned the corner."

Economists forecast claims would increase to 455,000 from a previously reported 452,000 for the prior week, according to the median of 47 projections in a Bloomberg survey. Estimates ranged from 430,000 to 464,000.

The four-week moving average, a less volatile measure, fell to 453,250, also the lowest since July, from 458,750. Fewer auto plants than usual closed for model-year retooling in July, pushing down the level of claims that month. Prior to July, the last time weekly claims were this low was in August 2008.

The number of people continuing to receive jobless benefits fell by 122,000 in the week ended October 16 to 4.36 million, the fewest since November 2008.

The continuing claims figure does not include the number of Americans receiving extended and emergency benefits under federal programmes. Those who've used up their traditional benefits and are now collecting emergency and extended payments decreased by about 414,100 to 4.66 million in the week ended October 9.