People looking for work search on computers at a Worksource office in Portland, Oregon, 03 Aug 2009Fewer Americans filed for new jobless benefits last week. Andeconomists say that July's unemployment report due out on Friday couldbe another sign that the recession has bottomed out. But even as thepace of job losses appears to be slowing, U.S. retailers continue toreport disappointing sales.

The U.S. Labor Department says about 550,000 Americansfiled new claims for jobless benefits last week. That was down 38,000from the previous week and below analysts' expectations.

Economist Mark Zandi of Moody's Economy.com says the new claims number is encouraging.

"Itindicates that the job market, while still bad, is getting better," hesaid. "The job losses, while still severe, are abating. And it is allconsistent with the idea that this recession is coming to an end."

Thedrop in jobless claims is giving economists hope that Friday'sunemployment report for July will be less severe than has been feared. U.S. unemployment stands at 9.5 percent and many economists expect therate to top 10 percent in coming months.

But even if the U.S.job market is showing modest signs of stabilizing, Americans are notinclined to spend. With few exceptions, U.S. merchants reporteddisappointing sales figures on Thursday, with shopping mall retailchains hit particularly hard.

Retail consultant Ken Perkins saysAmericans are consuming less and saving more. "They are not spendingtheir money right now. Clearly they are continuing to save," he said.

Retail analyst Candace Corlett says consumer confidence has yet to rebound.

"Theyare still not confident that the economy is any better now than it wasa year ago," said Corlett. "They are not confident that it is going tobe better next year."

But President Barack Obama's economic teamcontinues to express cautious optimism about the road ahead. Speakingin Washington, the Chairwoman of the president's Council of EconomicAdvisers, Christina Romer, said a return to economic growth willprecede job creation.

"Most forecasters are now predicting thatGDP growth is likely to turn positive by theend of the year," said Romer. "There is substantial uncertainty to thisforecast, and there is greater uncertainty about how strong therecovery is likely to be. Unfortunately, even once GDP begins to grow,it will likely take still longer for employment to stop falling andbegin to rise."

Romer said, as turbulent as U.S. economicconditions remain, they would be far worse if a massive $787 billionstimulus package had not been enacted in February.