OTTAWA - The number of people getting jobless benefits fell for the first time in almost a year in July and the number of new EI recipients declined for the second straight month, offering further evidence Canada's labour market is improving.

July saw the number of workers on Employment Insurance benefits drop by 31,500 to 787,000, a 3.8 per cent decrease from June, Statistics Canada said Monday.

The changes reflect in part the slowdown in job losses as the economy begins to grow again in the current summer quarter - after three quarters of economic shrinkage in the recession and the painful restructuring in Canada's auto and forestry industries that wiped out tens of thousands of jobs in the last year.

But it was the decline in new entrants to the EI rolls that economists saw as the best signal of progress from the harsh jobs market of late last fall and early 2009.

Initial claims were down 8.5 per cent to 274,700 during the month, following a similar decrease in June, Statistics Canada said.

"Less people are entering the system, so this is a good news story," said Millan Mulraine of the TD Bank.

"The pace of job losses we had a few months ago eased considerably and is declining, so that underscores the fact the labour market itself may be improving."

Employment statistics dating to last October, when the recession first hit, show that job losses mounted sharply in the first five months of the slump to a total of 357,000. Job losses then tailed off, totalling just 31,000 in the next five months through August.

In July, the same month covered by the jobless benefits data, 44,000 net jobs were lost, but some of that deterioration was reversed in August, when employment picked up by 27,000.

Since last October, 486,000 full-time jobs have disappeared in Canada, but Statistics Canada puts the net job loss at 387,000 because of a pickup in the number of part-time workers.

Labour economist Erin Weir agreed the decline in new entrants to the rolls of those on EI was welcome, but cautioned that the fall-off in Canadians receiving benefits is likely an indication that workers have exhausted their entitlements rather than that they have found new jobs.

"This development underscores the importance of enacting the proposed benefit extension for some long-tenured workers, but also the need for broader EI reform to improve benefits for all unemployed workers," he said.

Weir, an economist with the United Steelworkers union, pointed out that fewer than half of Canada's 1.6 million officially unemployed are receiving employment benefits.

The Conservative government has proposed changes that would allow Canadians with lengthy and established work records to receive benefits for a longer period.

Despite the decline in July, there were still 287,400 more Canadians, or 57.4 per cent, receiving EI benefits that month than last October.

Statistics Canada said the increase in beneficiaries over the past 12 months have come mostly in urban centres, with the largest in Calgary, Edmonton, Sudbury, Vancouver, Kitchener, Victoria and Abbotsford, B.C.

However, Weir said he has found that the percentage of jobless people who receive EI benefits tends to be lower in urban centres.

While there were exceptions, many of Canada's largest cities show the ratio of benefit recipients to the number of unemployed at well below the national average of about 50 per cent. His figures include 37 per cent for Montreal, 30.5 per cent for Toronto and Ottawa, 39 per cent for Calgary, 36 per cent for Edmonton, and 37 per cent for Vancouver.