The number of Americans filing new claims for unemployment benefits dropped to a nine-month low last week, suggesting the labor market's recovery was gaining momentum.

The picture of an economy gathering strength was further enhanced by other data on Thursday showing wholesale inventories in October rose by the most in five months, a sign businesses were rebuilding depleted inventories.

The recovery is picking up some momentum. We still have a long ways to go, but this is very consistent with a recovery that has shown a little bit more resilience in the second half of the year, said Paul Ballew, chief economist at Nationwide Insurance in Columbus, Ohio.

Initial claims for state unemployment benefits fell 23,000 to 381,000, the Labor Department said, the lowest since late February. Economists had expected a smaller fall to 395,000.

The report, coming after data last week showed a rise in hiring and a sharp drop in the unemployment rate to a 2-1/2-year low, implied further improvement in a sector that has been the Achilles heel of the U.S. recovery.

It was the latest sign of an acceleration in economic growth from the third quarter's tepid 2 percent annual pace.

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Graphic - U.S. jobless claims: http://link.reuters.com/pab55s

Graphic - Job prospects across industries: http://link.reuters.com/myw45s

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EUROPEAN CLOUD LOOMS

While the global economy is slowing and parts of the euro zone are already in recession, the United States continues to display relative strength, with data ranging from jobs to manufacturing suggesting growth is quickening.

The pickup in the labor market could improve President Barack Obama's prospects of winning a second term in what is shaping up to be a tough election next November, when the economy's performance will be front and center.

But there are concerns the festering euro zone debt crisis could hit the U.S. recovery hard next year, and many analysts expect the U.S. jobless rate to rise after a surprise drop to 8.6 percent in November.

Though the European Central Bank cut interest rates to a record low 1 percent on Thursday, it doused hopes of dramatic action to fight the region's debt crisis.

The downtrend in (U.S. jobless) claims remains intact, reinforcing the improving underlying fundamentals in the U.S. economy, which now looks to be outperforming most regions of the world, including China on a relative basis, said Eric Green, chief economist at TD Securities in New York.

However, good news can turn bad quickly if the euro crisis takes a turn for the worse.

Already, businesses wary of the European fiscal crisis are hogging cash, contributing to the economy slow growth pace.

Non-financial corporate businesses held a record $2.12 trillion in liquid assets, such as cash, during the third quarter, up from $2.07 trillion in the previous quarter, Federal Reserve data showed.

Apart from European headwinds, the economy also faces a drag in 2012 from federal spending cuts, and uncertainty about whether lawmakers will renew a payroll tax cut and extend benefits for the long-term unemployed.

Analysts warn that failure to renew the two measures, which expire at year-end, could cut as much as 1.2 percentage points from U.S. gross domestic product next year.

Stocks on Wall Street fell more than 1 percent after the ECB dashed hopes of more aggressive action to tackle the region's debt crisis. Longer-dated U.S. Treasury debt prices rallied on safe-haven flows, while the dollar rose broadly.

WHOLESALE INVENTORIES SURGE

In a separate report, the Commerce Department said wholesale inventories increased 1.6 percent in October after gaining 0.3 percent in September.

A liquidation of inventories cut into GDP growth in the third quarter and a restocking is expected to help lift the economy in the final three months of the year.

The strong stock accumulation by wholesalers prompted economists at Goldman Sachs to raise their fourth-quarter GDP estimate to a 2.9 percent pace from 2.7 percent. Macroeconomic Advisers upped their forecast by five-tenths to 3.5 percent.

Trade data on Friday will shed more light on the fourth quarter's growth outlook. The trade deficit is expected to have widened slightly to $43.5 billion in October from a shortfall of $43.1 billion in September.

The drop in claims last week more than unwound the prior two weeks' increase, and pulled them back below the 400,000 level usually associated with improving labor market conditions.

A four-week moving average of claims, considered a better measure of labor market trends, fell 3,000 to 393,250, the lowest since early April

A drop in the number of people still receiving benefits under regular state programs after an initial week of aid also offered a sign of an improving labor market.

That figure fell to 3.58 million in the week ended November 26, the lowest since mid-September 2008.

(Additional reporting by Jason Lange; Editing by Kenneth Barry)

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