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Labor market firming, but inflation still benign

WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting some strengthening of labor market conditions.

While job growth may be getting traction, inflation pressures remain muted. Other data on Thursday showed wholesale prices fell for a second straight month in October.

Initial claims for state unemployment benefits dropped 21,000 to a seasonally adjusted 323,000, the Labor Department said. Economists polled by Reuters had expected first-time applications to fall to 335,000 last week.

The four-week moving average for new claims, which irons out week-to-week volatility, fell 6,750 to 338,500. The claims data covered the survey period for November nonfarm payrolls.

Claims dropped 39,000 between the October and November survey periods, suggesting some pick-up in job growth.

While layoffs have slowed significantly to normal levels, there has not been a rapid acceleration in hiring as domestic demand remains lukewarm.

"We have a market that's not creating a lot of jobs and we are not losing a lot of jobs," said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis.

That sluggishness in demand was underscored by a second report from the Labor Department showing its seasonally adjusted producer price index slipped 0.2 percent last month as gasoline prices tumbled, after dipping 0.1 percent in September.

The decline in prices received by the nation's farms, factories and refineries was the largest since April.

In the 12 months through October, wholesale prices rose 0.3 percent after advancing by the same margin in September.

U.S. stock index futures held gains after the data. Prices for U.S. Treasuries and the dollar were little changed.

Wholesale prices excluding volatile food and energy costs rose 0.2 percent after nudging up 0.1 percent in September.

The core PPI was boosted in October by the introduction of new motor vehicle models into the survey. Excluding cars and trucks, the core PPI was up 0.1 percent.

Passenger car prices rose 1.7 percent, the most since October 2009, while light truck prices slipped 0.1 percent.

In the 12 months through October, the so-called core PPI increased 1.4 percent after rising 1.2 percent in September.

Though labor market conditions will probably determine when the Federal Reserve will start scaling back its massive bond buying program, persistently low inflation suggests the U.S. central bank might not act until March.

Last month, wholesale gasoline prices fell 3.8 percent. That accounted for nearly all the decline in the energy index.

Wholesale food prices rose 0.8 percent, boosted by increases in prices for beef and veal, which accounted for nearly 60 percent of the rise.

Record increases in the prices of rolls, muffins, bagels and croissants also lifted food prices in October. Food prices had edged up 0.1 percent in September.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci)