By Lucia Mutikani

WASHINGTON (Reuters) - The number of Americans filing new applications for jobless benefits slipped last week, but re-employment opportunities for laid-off workers are becoming more scarce, a sign that the unemployment rate probably remained elevated in August.

Though the labor market is slowing, it is doing so in an orderly fashion that is keeping the economic expansion on track. The economy grew faster than initially thought in the second quarter, powered by consumer spending, other data showed on Thursday. Corporate profits also rebounded last quarter, helping to further dispel fears of a recession.

While the labor market slowdown positions the Federal Reserve to start cutting interest rates next month, the data argues against a 50 basis point reduction in borrowing costs.

"The soft landing narrative for the economy remains intact for now," said Christopher Rupkey, chief economist at FWDBONDS. "Corporate profits bounced back as well in the second quarter which means companies are less likely to do any belt-tightening cost cuts to adjust their headcounts."

Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 231,000 for the week ended Aug. 24. Economists polled by Reuters had forecast 232,000 claims for the latest week. Claims have retreated from an 11-month high in late July as distortions from temporary motor vehicle plant shutdowns for new model retooling and the impact of Hurricane Beryl faded.

The Labor Department's Bureau of Labor Statistics last week estimated that employment growth was overstated by 68,000 jobs per month in the 12 months through March. But most economists viewed this so-called benchmark revision estimate as misleading.

The benchmark estimate is based on the Quarterly Census of Employment and Wages data, derived from reports by employers to the state unemployment insurance programs. The data does not include undocumented immigrants, a group that economists believe contributed to strong job growth last year.

"The BLS revisions likely revised the data down too much because the revision is based on administrative data from unemployment insurance files, which probably do not capture many of the increased jobs filled by undocumented workers," economists at Morgan Stanley wrote in a note.

A step-down in hiring because of tighter monetary policy is accounting for the loss of labor market momentum, rather than layoffs. It has attracted the attention of officials at the U.S. central bank, including Fed Chair Jerome Powell who last week said "the time has come for policy to adjust."

Financial markets expect the Fed to begin its easing cycle next month with a 25-basis-point reduction in its benchmark overnight interest rate. A half-percentage point cut is on the table. The Fed has maintained its policy rate in the current 5.25%-5.50% range for more than a year, having raised it by 525 basis points in 2022 and 2023.

Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

SOLID CONSUMER SPENDING

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 13,000 to a seasonally adjusted 1.868 million during the week ending Aug. 17, the claims report showed.

The so-called continued claims are near levels last seen in late 2021, indicating longer spells of unemployment.

Continuing claims data covered the period during which the government surveyed households to determine the unemployment rate for August. Continuing claims rose slightly between the July and August survey periods.

Economists are expecting the jobless rate this month to either have remained near a three-year high of 4.3% or fallen to 4.2%. The unemployment rate has risen for four straight months, partly reflecting an immigration-induced surge in labor supply.

Gross domestic product increased at a 3.0% annualized rate last quarter, revised up from the 2.8% rate reported last month, the Commerce Department's Bureau of Economic Analysis said in its second estimate of second-quarter GDP on Thursday. The economy grew at a 1.4% pace in the first quarter.

Consumer spending, which accounts for more than two-thirds of the economy, increased at an upwardly revised 2.9% rate. It was previously reported to have grown at a 2.3% pace, and is being partly driven by wages. That offset downgrades to business investment, mostly software. Exports and private inventory investment were also revised lower.

Inflation was fairly moderate, improving consumers' purchasing power. Income at the disposal of households after accounting for inflation increased at an unrevised 1.0% rate.

Households are saving less and also tapping savings to maintain spending. The saving rate was lowered to 3.3% from 3.5%.

Corporate profits including inventory valuation and capital consumption adjustments increased $57.6 billion to a record high after declining by $47.1 billion in the first quarter. Profit margins increased 0.2 percentage point to 15.4%.

"Profit margins are solid and will be a support to business investment, allowing businesses to absorb any increase in input costs, particularly from supply-chain issues, as consumers are increasingly price sensitive," said Ryan Sweet, chief U.S. economist at Oxford Economics.

When measured from the income side, the economy grew at a 1.3% rate last quarter. Gross domestic income (GDI) increased at a 1.3% pace in the January-March quarter. In principle, GDP and GDI should be equal, but in practice they differ as they are estimated using different and largely independent source data.

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 2.1% rate last quarter after advancing at a 1.4% pace in the first quarter.

Though a third report from the Commerce Department's Census Bureau showed the goods trade deficit widening 6.3% to $102.7 billion in July amid a 2.3% surge in imports, the impact on GDP is likely to blunted by rising inventories.

Importers are likely front-loading imports, which are ending up as inventories, in anticipation of higher tariffs should former President Donald Trump be returned to the White House in November's election. Wholesale inventories increased 0.3%, while stocks at retailers jumped 0.8%.

"Growth will slow in the near term, but there will not be a recession," said Gus Faucher, chief economist at PNC Financial.