The number of U.S. workers drawing unemployment aid jumped to a record high in early February according to data on Thursday that highlighted the deteriorating labor market as a 13-month recession deepens.
A separate report showed prices received by U.S. producers rose last month, breaking a five straight month declining trend as energy costs rebounded.
The number of people remaining on the benefits rolls after drawing an initial week of aid surged 170,000 to 4.99 million in the week ended Feb 7, the most recent week for which the data is available, the Labor Department said.
That was the highest reading on records dating back to 1967. Analysts had estimated so-called continued claims would be 4.86 million from a previously reported 4.81 million the prior week.
We're maintaining a high level of labor market deterioration. In general I think we're moving toward the pace of maximum contraction in the economy, but evidence for that is only preliminary, said Alan Levenson, chief economist at T. Rowe Price in Baltimore.
U.S. equity index futures pared gains after jobless data. U.S. Treasury debt prices and the U.S. dollar held losses.
The U.S. economy, in recession since December 2007, is buckling under a heavy burden of rising unemployment as companies try to slash costs to deal with sagging demand.
The aggressive layoffs and the accompanying job insecurity mean that households, whose net worth has already been eroded by the collapse of the housing and stock markets, will further cut on spending and creating a vicious cycle for the bleeding economy.
Initial claims for state unemployment insurance benefits were a seasonally adjusted 627,000 in the week ended February 14 unchanged from the previous week. According to Labor Department data, new claims hovered close to a 26-year high.
Analysts polled by Reuters had forecast 620,000 new claims.
In another report, the department said the producer price index rose 0.8 percent in January, rising for the first-time since July, compared to a 1.9 percent drop in December.
Analysts polled by Reuters had forecast a 0.2 percent rise in the overall index. However, compared to the same period last year, the producer price index fell 1 percent, the largest decline since October 2006.
Core producer prices, excluding food and energy costs, rose 0.4 percent in January, also above market expectations for an increase of 0.1 percent. Core PPI rose 0.2 percent in December.
I wouldn't get excited about core being up 0.4 percent as a sign of stagflation. I think there are some anomalies and that we will be in a deflationary environment for several months, said Kevin Flanagan, fixed income strategist at Morgan Stanley in Purchase, New York.
Compared to the same period a year ago, core producer prices were up 4.2 percent.
Energy prices surged 3.7 percent in January, halting five months of declines. Gasoline prices jumped 15 percent, the biggest increase since November 2007.
Food prices fell 0.4 percent, with declines in diary and meat costs more than offsetting sharp increases in vegetables.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)