NEW YORK (CNN/Money) - The number of Americans filing for unemployment benefits for the first time fell sharply last week from their highest level in more than 20 years, the government said Thursday, as the labor market struggled to end a prolonged downturn.

The Labor Department said the number of Americans filing new claims for unemployment benefits fell to 412,000 in the week ended July 12 from a revised 441,000 the prior week. Economists, on average, expected 425,000 new claims, according to a Reuters poll.

U.S. stock futures continued to trade lower after the report, pointing to a negative opening on Wall Street. Treasury bond prices fell.

Many economists believe the 400,000 level of claims is a benchmark for labor-market weakness; others think the threshold should be higher. Regardless, few economists would argue that the labor market is particularly strong at the moment.

The U.S. unemployment rate is at 6.4 percent, the highest level since April 1994, and payrolls still are 2.6 million jobs thinner than they were in March 2001, when economists at the National Bureau of Economic Research say a recession began.

The NBER announced Thursday that the recession ended in November 2001. The labor market's recovery, on the other hand, hasn't come yet.

After a modest rebound in early 2002, the market weakened again, and most economists said for months that the economy's biggest problem was the U.S.-led war with Iraq. According to their view, businesses would make long-term spending and hiring plans when the war was over.

However, the war has been over for nearly two months and jobless claims have been consistently high, drawing the attention of Federal Reserve Chairman Alan Greenspan, who has warned they were a sign of business caution that could slow down an economic recovery.

In an effort to cut borrowing costs and keep consumers spending despite job-market pain, Fed policy makers cut their target for a key short-term interest rate in late June.

The Fed and other economists have expressed optimism that businesses will eventually start hiring again when they see demand pick up significantly -- but that process could take months, many economists believe.

In the Labor Department's report, the four-week moving average of new claims, which irons out the ups and downs of the volatile weekly data, fell to 424,000 from a revised 427,500 the prior week

Continued claims, the number of people out of work for a week or more, fell to 3.65 million in the week ended July 5, the latest data available, from a revised 3.77 million the prior week.