The number of U.S. workers filing new applications for jobless insurance unexpectedly rose last week, but a gauge of future economic activity increased for the eighth month in a row, pointing to a slow economic recovery where employment looms as the dominant concern.
A separate report from the Philadelphia Federal Reserve Bank also gave hints of future strength, showing that factory activity accelerated rapidly in the U.S. Mid-Atlantic region in December, beating markets forecasts for growth to slow slightly.
Initial claims for U.S. state unemployment benefits climbed 7,000 to a seasonally adjusted 480,000 in the week ended December 12 from a slightly downwardly revised 473,000 in the prior week, the Labor Department said on Thursday. It was the second straight week initial claims rose.
Analysts polled by Reuters had forecast jobless claims falling to 465,000 from a previously reported 474,000. The weekly claims data covers the December payrolls survey week.
Meanwhile, the U.S. Conference Board's Leading Economic Index increased 0.9 percent in November to 104.9 after rising an unrevised 0.3 percent in October, boosted by improving financial conditions, employment and housing, the private research group said.
Conference Board Economist Ken Goldstein said the employment level held steady in November, marking the first month since December 2007 when the country's labor conditions did not drag on the index.
U.S. stock indexes trimmed losses after the index was released, but remained close to session lows, while U.S. Treasury debt prices pared gains slightly and the U.S. dollar was little changed after a sharp overnight rise.
The Federal Reserve on Wednesday left overnight lending rates unchanged near zero and renewed its promise to hold them low for an extended period. The U.S. central bank noted that the labor market deterioration was abating, though companies remained reluctant to add to payrolls.
OVERALL LABOR MARKET SEEN RECOVERING
The four-week moving average for new claims fell 5,250 to 467,500 last week, the lowest level since September 2008, and dropping for the 15th week in a row. The four-week moving average is viewed as a better gauge of underlying trends as it irons out week-to-week volatility.
According to analysts, the four-week moving average needs to drop below 450,000 to indicate labor market stability.
A Labor Department economist said given that actual claims had not declined by as much as the seasonal factors had expected, the seasonally adjusted number increased a little bit.
Analysts reckon the job market, the worst-hit sector during the worst recession in 70 years, is starting to turn around and employers last month cut the fewest jobs in more than a year.
Overall, the labor market is recovering, although the last two jobless claims numbers suggest that the pace is still fairly gradual, said Vassili Serebriakov, senior currency strategist at Wells Fargo in New York.
The number of workers still collecting benefits after an initial week of aid rose 5,000 to 5.19 million in the week ended December 5. This was above market expectations for 5.15 million. So-called continuing claims are below their peak of 6.9 million in June.
Things are still tough out there in the labor market. The Fed's decision to stand pat yesterday and keep rates low for an extended period was a good one, said Jamie Cox, managing partner at Harris Financial Group in Colonial Heights, Virginia.
Meanwhile, the Leading Economic Index points to a bright new year, the U.S. Conference Board's Goldstein said.
Looking ahead, we can expect a slowly improving economy through 2010, he added.
The coincident index, a measure of current economic conditions, also rose, by 0.2 percent in November. But the lagging index fell 0.4 percent.
Stepping back, it's clear that we're in recovery and that's continuing at a very nice pace in Q4, said Julia Coronado, a senior U.S. economist for BNP Paribas in New York, about the index.
(Additional reporting by Lisa Lambert and Gertrude Chavez-Dreyfuss, John Parry and Burton Frierson in New York; Editing by Andrea Ricci)