The number of U.S. workers filing new claims for unemployment benefits fell only slightly last week, indicating a sluggish return to jobs growth. The U.S. trade gap shrank as oil imports fell.
Thursday's reports painted a picture of an economy that was slowly improving, frustrating efforts by President Barack Obama to boost employment.
The data is consistent with our expectations of 'half-speed' economic recovery, said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.
Initial claims for state unemployment benefits slipped 6,000 to 462,000, the Labor Department said, a touch less than market expectations for a drop to 460,000.
Separately, the Commerce Department said the U.S. trade gap shrank 6.6 percent to $37.3 billion in January as oil imports fell to their lowest since February 1999. Exports declined too. Analysts had expected the deficit to widen to $41.0 billion.
Stocks initially fell on the claims data and worries a jump in Chinese inflation to a 16-month high could prompt Beijing to take steps to prevent the economy from overheating.
Stocks ended higher on late rally in bank shares, with the Standard & Poor's 500 index touching its highest closing level in 17 months.
U.S. government debt prices fell. However, the price for30-year bond rose after the government's sale of $13 billion worth of the security was well bid. The dollar was little changed against major currencies.
After falling sharply in the second half of 2009, initial weekly jobless claims have stalled around 470,000 in recent months. Analysts say they need to drop to a 400,000 to 450,000 range to signal sustainable private-sector job growth.
Still, the uncomfortably high levels of claims did not alter expectations that job creation was set to resume in March, boosted by temporary hiring for a U.S. census and a bounceback from snowstorm-hit February.
JOBS EYED IN MARCH
That story still holds. I wouldn't be surprised to see a couple of hundred thousand jobs created in March, said John Canally, an economist at LPL Financial in Boston.
If you exclude census workers over the next couple of months, you can create from a hundred to two hundred thousand jobs, which is not booming, but it's better than a jobless recovery.
The economy has lost 8.4 million jobs since the start of the downturn in December 2007, a major challenge for Democrats, who are at risk of losing their majorities in the U.S. House of Representatives and Senate in November elections.
Obama, who has set a goal of doubling U.S. exports to more than $3 trillion over the next five years to help create two million jobs, on Thursday laid out a plan to boost U.S. exports.
He also pressed China to let its yuan rise in value, which would help U.S. exporters, who say the currency is undervalued, giving Chinese exporters an unfair advantage.
The closely watched trade deficit with China widened slightly in January to $18.3 billion, even as U.S. imports from that country fell to their lowest since June 2009. U.S. exports to China shrank by a larger 17.6 percent.
Government data this week showed jobs opened up in January at the fastest pace in nearly a year and other employment indicators continue to point to an improving trend.
Restoring growth to the labor market, hard hit by the most painful economic downturn since the 1930s, is crucial to sustaining the economy's recovery when the boost from government stimulus and a turn in the inventory cycle wanes.
There are signs that household finances, ravaged by the recession, are starting to recover, which should boost demand.
U.S. households' net worth edged up $700 billion to $54.2 trillion in the fourth quarter, gaining for a third straight quarter, on rising stock market prices and a stabilizing housing market, Federal Reserve data showed.
Officials from the Fed -- the U.S. central bank -- meet next week and are expected to hold overnight interest rates in a range of zero to 0.25 percent and maintain a pledge to keep them ultra-low for an extended period to try to foster a stronger recovery.
U.S. imports fell 1.7 percent in January, while exports slipped 0.3 percent after rising in the eight prior months.
Analysts shrugged off both declines and said they expected a reversal in February. They saw no impact on first quarter gross domestic product growth from the narrow trade deficit.
The fact that exports and imports fell in January does not mean that the rebound in world trade is over. The latest survey data suggest that the rebound in exports and imports has much further to run yet, said Paul Dales, a U.S. economist at Capital Economics in Toronto.
(Additional reporting by Emily Kaiser)