Companies in the US cut fewer jobs in July as the worst recession since the Great Depression eased, a private report based on payroll data showed.

The estimated 371,000 drop, higher than economists had forecast, followed a revised 463,000 decline the prior month, figures from ADP Employer Services showed ON Friday.

Stabilisation in housing and manufacturing and help from the federal stimulus effort will usher economic growth this quarter, economists say. Consumer spending, which accounts for 70 percent of the economy, may be slow to gain speed as home prices fall, wages stagnate and unemployment climbs.

"We have seen the worst, but there is still more pain ahead," said David Semmens, an economist at Standard Chartered Bank in New York. "Consumer spending will remain weak, especially as we head towards double-digit figures in unemployment."

The economy already has lost 6.5 million jobs since the recession began in December 2007, the most of any economic slump since the 1930s.

The ADP report was forecast to show a decline of 350,000 jobs, according to the median estimate of 30 economists in a Bloomberg survey. Projections ranged from decreases of 410,000 to 200,000.

ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.

"We're heading in the right direction and heading there at about the pace we expect," Chris Varvares, president of Macroeconomic Advisers, said on a conference call. Job losses may "dwindle toward zero" by the end of this year, and payrolls may turn positive by early 2010, he said.

Employers announced 5.7 percent fewer job cuts in July than the year earlier, according to a report today by Chicago-based placement firm Challenger, Gray & Christmas Inc. Following a 9 percent drop in June, it was the first time since late 2007 that planned firings declined for two months in a row.