New U.S. claims for unemployment benefits fell more than expected last week but remained too high to signal a material shift in a weak labor market that is constraining economic growth.
The data from the Labor Department on Thursday, coming on the heels of reports this week showing a slump in housing and weakening demand for long-lasting manufactured goods, was welcome news amid escalating fears the economy was slipping back into recession.
No one was bullish on the labor market, but it was not as bearish as some people had thought. Our call is still that we are not heading toward a double-dip (recession), said Thomas Simons, a money market economist at Jefferies & Co. in New York.
Initial claims for state unemployment benefits fell 31,000 to a seasonally adjusted 473,000 last week, well below market expectations for a drop to 490,000.
But the four-week average of new claims -- considered a better measure of underlying labor market trends -- rose 3,250 to 486,750, the highest since late November.
A Labor Department official said there were no special factors influencing the report.
U.S. stocks opened higher on the report, while prices for safe-haven government debt fell modestly. The U.S. dollar rose versus the yen.
The claims report will be of little comfort for President Barack Obama and his fellow Democrats ahead of a tough mid-term election in November.
Obama is increasingly falling out of favor with Americans frustrated with a 9.5 percent unemployment rate and the Democratic Party could lose its control of Congress.
A Reuters/Ipsos poll this week found 72 percent of respondents were very worried about joblessness, while Obama's approval rating, at 45 percent, was overtaken for the first time by a 52 percent disapproval rating.
Claims for unemployment benefits have hovered above the 400,000 to 450,000 range many analysts say is associated with sustained jobs growth and this implies unemployment will remain stubbornly high well into 2011.
Today's number is certainly a relief but it doesn't change the fact that it's still very elevated at this point of an economic expansion as the labor market still remains very sluggish with businesses still reluctant to hire, said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York.
The government on Friday is expected to revise second-quarter gross domestic product growth lower to an annual pace of 1.4 percent from 2.4 percent, according to a Reuters survey.
The tide of weak data so far for July has prompted some economists to lower their growth forecasts for the third quarter.
The claims report also showed the number of people still receiving benefits after an initial week of aid fell 62,000 to 4.46 million in the week ended August 14.
So-called continuing claims covered the survey period for August's employment report, expected to show the jobless rate ticking up to 9.6 percent. Analysts had forecast continuing claims rising to 4.50 million.
The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, edged down to 3.5 percent in the week ended August 14 from 3.6 percent. The number of people on emergency benefits increased 199,493 to 4.90 million in the week ended August 7.