The number of U.S. workers submitting new claims for unemployment benefits fell slightly last week, implying only a gradual labor market improvement even as the economic recovery broadens out.
While the data on Thursday did not change views employers probably added to payrolls this month, analysts were disappointed with how slowly claims were declining and said it showed companies were reluctant to embark on a hiring spree.
Initial claims for state unemployment benefits fell 11,000 to a seasonally adjusted 448,000, the Labor Department said. That was slightly below market expectations claims would drop to 445,000.
Some companies are still struggling and believe they can meet any increase in demand with a smaller workforce. The recovery in the labor market is probably going to be more modest than a lot of people are expecting, said Paul Dales, a U.S. economist at Capital Economics in Toronto.
The Federal Reserve on Wednesday acknowledged the labor market was improving, but noted that employers remained reluctant to add payrolls. The U.S. central bank left overnight benchmark lending rates near zero and renewed its commitment to keep them low for an extended period.
Economists are concerned that claims remain above 400,000, a level they say is historically associated with a steady pace of jobs growth. Analysts anticipate data next week will show the unemployment rate was unchanged at 9.7 percent in April for fourth straight month.
The report had little effect on U.S. stocks, which rallied broadly as debt-ridden Greece looked closer to a bailout deal. Prices for U.S. government debt were flat, while the dollar fell against a resurgent euro.
UNEMPLOYMENT TO REMAIN HIGH
Though the manufacturing-led U.S. economic recovery is spreading out to other sectors, it is probably not vigorous enough to encourage much hiring. Indications are that unemployment will likely remain elevated for a while.
Gross domestic product data on Friday is expected to show the economy grew at a 3.4 percent annual rate in the first quarter, with consumer spending accounting for much of the advance, according to a Reuters survey.
While slower than the 5.6 percent pace set in the fourth quarter, it will be the third straight quarter of expansion as the economy climbs out of the worst downturn since the 1930s.
The economy is doing better, growth will gradually get back up toward its potential and the unemployment rate will continue to come down slowly. We are on the right track, said Ray Stone, managing director at Stone & McCarthy Research Associates in Princeton, New Jersey.
The four-week moving average of new claims, seen as a more-reliable barometer of labor-market trends, rose 1,500 to 462,500 last week, the department said. It was the fourth straight weekly increase.
Private hiring last month handed the economy its largest jobs gain in three years. While analysts believe payrolls grew again in April, they expect much of the boost to come from government hiring for a decennial census.
We expect nonfarm payroll hiring of 175,000 for April, consisting of underlying hiring of 50,000 and a census contribution of 125,000, wrote economists at Goldman Sachs.
The number of people still receiving benefits after an initial week of aid fell to 4.65 million in the week ended April 17, a touch above market expectations for 4.62 million.
The so-called continuing claims data covered the household survey week from which the national unemployment rate is derived.
The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, was unchanged at 3.6 percent in the week ended April 17.
Separately, the Chicago Federal Reserve national activity index rose in March, but still indicated below-trend growth.
(Additional reporting by Ann Saphir in Chicago; Editing by Andrew Hay)