By Geoffrey Smith 

-- The labor market in the U.S. continued to show strength last week, with initial claims for jobless benefits falling slightly to 250,000.

The decline defied expectations of a rise to a level that would have been the highest since January, and is further evidence that people are still finding new jobs without too much trouble even if they are caught up in a slowdown that appears to be affecting more and more sectors of the economy.

The Labor Department also revised down last week's figure for initial claims by 10,000 to 252,000.

The slow upward trend in initial claims has now been effectively on hold for a month, having peaked at 261,000 in mid-July. However, continuing claims continued their slow drift upward, hitting 1.437 million, the highest since April. 

Coupled with a surprisingly positive manufacturing index from the Philadelphia Federal Reserve, the jobless claims numbers were enough to turn U.S. stock futures positive, bolstering confidence that the economy can indeed cope with higher interest rates. Futures had been negative earlier in the overnight session, depressed by the tone of the minutes from the Fed's latest policy meeting, which made clear that the central bank will be tightening policy for some time yet.

"Good news for the economy but on its own, it’s not enough to impact Fed policy," said Kathy Jones, chief fixed-income strategist with Charles Schwab (NYSE:SCHW).