The number of U.S. workers filing new claims for unemployment benefits fell more than expected last week, welcome news for the White House as it predicted more than 1 million jobs will be created this year.

President Barack Obama has made job growth his top 2010 priority as voters increasingly blame his Democratic party for unemployment near the highest level since 1983.

In an annual economic report to Congress on Thursday, the White House predicted an average of 95,000 jobs a month will be created this year, yet the jobless rate may tick back up to 10 percent as discouraged workers come back into the market.

There were some positive signs from the Labor Department, which reported initial applications for state unemployment benefits dropped by 43,000 to a seasonally adjusted 440,000 last week, down from a revised 483,000 in the prior week.

Analysts had expected claims to slip to just 465,000.

The prior week's unexpectedly high reading was blamed in part on a backlog of claims that piled up over the holiday season and a Labor Department official said the report showed this backlog was largely washed out.

The numbers are coming down to an area where we could begin to see some positive job growth, said Gary Thayer, chief macrostrategist at Wells Fargo Advisors in St. Louis.

The tumble in jobless claims helped lift U.S. stock prices, which have been under pressure on concerns over a European deal to help Greece with its debt crisis. Stocks were higher near midday, while U.S. Treasury debt prices slipped.


Investors are keeping a close eye on jobless claims for evidence that the economy is on the verge of adding jobs again. With the exception of November 2009, payrolls have declined in every month since the recession began in December 2007.

That has piled political pressure on Obama, whose popularity fell as the jobless rate rose.

In the economic report, the White House said it expects the economy to create an average of 190,000 jobs a month in 2011, double what it expects for this year.

That rate of job creation would add up to about 3.4 million jobs in two years, less than half of the 8.4 million that have been lost since the start of the recession.

It would also leave the jobless rate well above its normal level of 5 percent. Economists estimate that about 100,000 jobs are needed each month just to meet labor force growth and keep the unemployment rate steady.

More than 1 million people gave up looking for work as the job market deteriorated, and are therefore not counted among the unemployed. As jobs reappear, many of these people are expected to return to the labor market, making it even harder to create enough jobs to cut the unemployment rate.

We are, as we've said many times, expecting positive job growth by spring, Christina Romer, chairman of the president's Council of Economic Advisers, said on Reuters Insider.

However, the White House acknowledged the unemployment rate would probably fall only slowly, and it was concerned about the large number of people out of work for a prolonged period.

In an ominous sign for the job market, the latest semiannual survey of the Business Council -- which includes as members the top executives of over 100 U.S. companies -- showed CEOs remained wary of hiring.


The jobless rate declined to 9.7 percent last month from 10 percent in December, even as the economy lost 20,000 jobs. Many analysts viewed the decline in unemployment as an aberration.

Lawmakers are worried high unemployment will translate into voter anger come November elections. Senate Democrats on Thursday released a draft of legislation aimed at creating jobs via tax cuts and other incentives.

The weekly report on unemployment benefits showed the number of people applying after an initial week of aid fell to 4.54 million in the week ended January 30, the lowest in 13 months. That figure is somewhat skewed by the fact that many people have dropped off the rolls because they have exhausted benefits, not because they have found new jobs.

A four-week moving average of initial claims, which smooths out week-to-week volatility, fell by 1,000 to 468,500 last week. Initial jobless claims had increased through January, giving rise to concerns the slow healing of the battered labor market had stalled. The latest report offered hope a longer-term improvement trend was still in place.

The good news ... is that the Labor Department administrators are telling us that they have gotten through a backlog and perhaps the labor market hasn't deteriorated very much in the last two months, said Cary Leahey, senior economist with Decision Economics in New York.

(Additional reporting by Ellen Freilich in New York; Editing by Andrea Ricci)