U.S. Jobless Claims Suggest Stumbling Labor Recovery

The number of Americans lining up for new jobless benefits fell only slightly last week, the latest sign of a weaker pace of healing in the still-struggling labor market.

Initial claims for state unemployment benefits dropped by 1,000 to a seasonally adjusted 388,000, the Labor Department said on Thursday.

"This was a disappointing number and offers more evidence that the labor market continues to lose traction," said Joe Manimbo, an analyst at Western Union Business Solutions in Washington.

Economists polled by Reuters had forecast new claims falling to 375,000 last week.

Still, a separate report offered fresh hopes of a pickup in the housing market, which has been a drag on wider economic growth since the 2007-2009 recession.

The National Association of Realtors said contracts to purchase previously owned U.S. homes rose 4.1 percent to a near two-year high in March.

U.S. stocks rose following the release of the home sales data, while concerns over the labor market pushed yields lower on U.S. government debt.

The jobless claims report was the latest example of fizzling momentum in the labor market recovery.

New claims for unemployment benefits fell sharply over the winter but the improvement has largely reversed over the last month.

Employers added 120,000 new jobs to their payrolls in March, the least since October, after averaging 246,000 jobs per month over the prior three months.

The four-week moving average for new claims, a closely followed measure of labor market trends, rose 6,250 to 381,750, its highest since the week that ended January 7.

Other reports have shown the economy losing a step at the close of the first quarter. New orders for long-lasting U.S. manufactured goods tumbled in March and industrial output was flat for the second straight month.

Federal Reserve Chairman Ben Bernanke on Wednesday said the U.S. central bank "would not hesitate" to launch another round of bond purchases to drive borrowing costs lower if it looked like the economy needed it. The unemployment rate fell to 8.2 percent in March although the Fed said that level was still elevated.

Many economists believe a mild winter boosted payrolls growth and lowered claims for jobless benefits. They had viewed recent stagnation as payback for those gains. But the longer claims stay elevated, the more likely that an underlying deterioration in the labor market is occurring.

"This (claims data) would increase concerns over what we saw earlier this year was really a fluke," said Beth Ann Bovino, an economist at Standard & Poor's Ratings Services in New York.

A Labor Department official said there was nothing unusual in the state-level data in the claims report.

The number of people still receiving benefits under regular state programs after an initial week of aid rose 3,000 to 3.32 million in the week ended April 14.

The number of Americans on emergency unemployment benefits fell 45,930 to 2.73 million in the week ended April 7, the latest week for which data is available.

A total of 6.68 million people were claiming unemployment benefits during that period under all programs, down 87,160 from the prior week.

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