(Adds housing, factory data, updates markets)
* Weekly jobless claims fall 19,000
* Claims lowest in nearly 8-1/2 years
* New home sales fall 8.1 percent in June
WASHINGTON, July 24 (Reuters) - The number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years last week, suggesting the labor market recovery was gaining traction.
But other data on Thursday showed factory activity cooling this month and new homes sales tumbling in June. Given the volatility of new home sales data, last month's sales plunge is unlikely to change the view of a housing market back on track.
Initial claims for state unemployment benefits declined 19,000 to a seasonally adjusted 284,000 for the week ended July 19, the lowest level since February 2006, the Labor Department said. Economists had expected claims to rise to 308,000.
The data provided further confirmation that the labor market is tightening. Employment has grown by more than 200,000 jobs in each of the last five months, a stretch not seen since the late 1990s.
"This is consistent with another payroll reading for July, but it will probably not be as strong as June," said Sam Bullard, senior economist with Wells Fargo Securities in Charlotte, North Carolina.
In a separate report, financial data firm Markit said its preliminary U.S. Manufacturing Purchasing Managers Index slipped to 56.3 in July from 57.3 in June. A reading above 50 signals expansion in factory activity.
Although growth in new orders and factory employment eased a bit, the report continued to point to an acceleration in economic growth early in the third quarter. Growth in the April-June period is forecast topping a 3 percent annual pace.
The economy contracted at a 2.9 percent rate in the first quarter.
While the economy now appears to be firing on nearly all cylinders, housing continues to lag behind despite indications it is starting to recover. A report earlier this week showed existing homes sales at an eight-month high in June.
Another report from the Commerce Department on Thursday showed new home sales dropped 8.1 percent, the largest decline since July 2013, to a seasonally adjusted annual rate of 406,000 units in June.
U.S. stocks were little changed on the mixed data, while the dollar pared gains versus the yen. Prices for U.S. Treasury debt fell.
FED WATCHING LABOR MARKET
Federal Reserve Chair Janet Yellen cautioned last week that the Fed could raise interest rates sooner and more rapidly than currently envisioned if the labor market continued to improve faster than anticipated by policymakers.
Economists currently do not expect the U.S. central bank to start raising interest rates before the second half of 2015. The Fed, which is wrapping up its monthly bond buying program, has kept overnight lending rates near zero since December 2008.
"The Federal Reserve will look at this (jobless claims data) as a favorable development for the jobs market as they look toward timing for normalizing monetary policy," Bullard said.
While jobless claims tend to be volatile around this time of the year, when automakers shut down plants for retooling, a Labor Department analyst said there were no special factors influencing the state level data.
The four-week average of claims, considered a better gauge of labor market trends as it irons out week-to-week volatility, fell 7,250 to 302,000, the lowest level since May 2007.
The claims report showed the number of people still receiving benefits after an initial week of aid fell 8,000 to 2.50 million in the week ended July 12, the lowest level since June 2007.
The so-called continuing claims data covered the week of the household survey from which the unemployment rate is calculated.
Continuing claims fell 68,000 between the June and July survey periods, suggesting the unemployment rate could decline from near a six-year low of 6.1 percent.
The unemployment rate for people receiving jobless benefits was unchanged at 1.9 percent for the week ended July 12.
The decline in continuing claims indicates some long-term unemployed Americans are finding jobs, a key metric for Fed policymakers.
(Reporting by Lucia Mutikani; Additional reporting by Richard Leong and Ryan Vlastelica in New York; Editing by Paul Simao)