* Weekly jobless claims fall 15,000
* Four-week average of claims drops 2,250
* Mid-Atlantic factory activity slows in July
WASHINGTON, July 20 (Reuters) - The number of Americans filing for unemployment benefits fell more than expected last week, touching its lowest level in nearly five months, suggesting strong job gains that should continue to underpin economic growth.
Sustained labor market strength likely keeps the Federal Reserve on track to raise interest rates for a third time this year and announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, despite a recent ebb in inflation pressures.
Initial claims for state unemployment benefits dropped 15,000 to a seasonally adjusted 233,000 for the week ended July 15, the Labor Department said on Thursday. That was the lowest level since February, when claims fell to 227,000, which was the best reading since March 1973.
Economists polled by Reuters had forecast claims falling to 245,000. It was the 124th straight week that claims remained below 300,000, a threshold associated with a robust labor market. That is the longest such stretch since 1970, when the labor market was smaller.
The labor market is near full employment, with the jobless rate at 4.4 percent. Last week's drop in claims unwound the recent increase which economists had attributed to volatility associated with different timings of automobile plant shutdowns for annual retooling.
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2,250 to 243,750 last week.
Prices for U.S. government bonds pared earlier gains following the data, while the dollar was little changed against a basket of currencies.
Last week's claims data covered the survey period for July's nonfarm payrolls. The four-week average of claims fell 1,250 between the June and July survey periods, suggesting strong job gains in July.
The economy created 222,000 jobs last month, the second biggest payrolls increase this year.
Other data on Thursday showed a moderation in manufacturing activity in the mid-Atlantic region in July amid a tepid increase in orders received by factories.
The Philadelphia Fed said its current business conditions index fell to a reading of 19.5 this month, the lowest since November, from 27.6 in June.
Thirty-seven percent of the firms surveyed reported increases in activity in July, down from 42 percent last month. The survey's new orders index fell 24 points as nearly 31 percent of factories reported a rise in new orders, down from 45 percent in June.
While manufacturers reported overall increases in factory employment this month, the current employment index fell five points. The index has been positive for eight consecutive months. Seventeen percent of manufacturers reported an increase in employment this month, while 6 percent reported a decrease.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)