U.S. employers cut 247,000 jobs in July, far less than expected and the least in any month since last August, according to data on Friday that provided the clearest evidence yet that the economy was turning around.

With fewer workers being laid off, the unemployment rate eased to 9.4 percent in July from 9.5 percent the prior month, Labor Department data showed, the first time the jobless rate had fallen since April 2008.

The government revised job losses for May and June to show 43,000 fewer jobs lost than previously reported.

Analysts had expected non-farm payrolls to drop 320,000 in July and the unemployment rate to rise to 9.6 percent. The forecast was made earlier this week before other jobs data prompted some economists to lower their estimates for job losses.

U.S. stock index futures jumped on the data, which was seen as more evidence the economy's healing process had started. U.S. government bond prices tumbled and the dollar rose against the Japanese yen.

This is positive news. This is the best showing (since) prior to the financial meltdown and those are important benchmarks to achieve, said Richard Dekaser, president of Woodley Park Research in Washington.

Data ranging from home sales to manufacturing have pointed to an economy starting to dig itself out of the worst recession since the Great Depression of the 1930s.

The fall in the jobless rate will be good news for President Barack Obama, who has seen his standing in public opinion polls slip as Americans fret about the weak economy and high unemployment.

MOSTLY GOOD NEWS

While employers cut fewer jobs than forecast in July, unemployment remains stubbornly high, meaning households have less income to spend. This could set the economy for an anemic recovery, analysts say.

Moreover, in July the workforce fell by 422,000, far more than the 155,000 decline in June, suggesting jobless workers may have given up looking for new work.

Since the start of the recession in December 2007, the economy has shed 6.7 million jobs, the department said, adding that the number of long-term unemployed continues to rise.

Job losses in July were spread across all sectors, but the pace of firings slowed markedly from previous months.

Manufacturing employment fell by 52,000 -- the first time since September losses were less than 100,000 -- after shrinking by 131,000 in June. This was probably due to the reopening of General Motors and Chrysler assembly plants after bankruptcy closures.

Because layoffs in auto manufacturing already had been so large, fewer workers than usual were laid off for seasonal shutdowns in July, Labor Commissioner Keith Hall said, adding that the seasonally adjusted gain did not indicate an improvement in the industry.

Payrolls in construction industries slipped 76,000 after falling 86,000, likely reflecting spending on infrastructure projects from the government's $787 billion stimulus package and a modest pickup in ground breaking for new homes.

In the service-providing sector, 119,000 workers were laid off, and the goods-producing industries purged 128,000 positions.

Education and health services continued to add jobs, with payrolls increasing 17,000 in July after rising 37,000 in June. Government employment increased 7,000 after slipping 48,000 in June.

The closely watched average work week, the total amount of labor input, inched up to 33.1 hours in July after having slipped to 33.0 in June. The average work week in the manufacturing sector rose to 39.8 hours from 39.5 hours in June, the department said.

Average hourly earnings increased to $18.56 in July from $18.53.

(Additional reporting by Richard Leong in New York, Editing by Andrea Ricci)

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