U.S. Jobless Claims Rise in Latest Week

By: Nancy Waitz

The number of people applying for U.S. initial jobless aid rose unexpectedly by 16,000 last week, a government report showed on Thursday, as gloom in the labor market persisted.

First-time claims for state unemployment insurance benefits, a guide to the pace of layoffs, rose to 442,000 in the May 31 week, its highest in over a month, compared with a revised 426,000 the prior week, the Labor Department said.

Analysts were expecting 420,000 first-time claims.

"The labor market is still not taking part in a broader U.S recovery", said Rebecca Patterson, a global currency strategist with JP Morgan in New York.

The department said the calculation to adjust for seasonal factors had difficulty accounting for last week's Memorial Day holiday, because it was a so-called floating holiday, which do not fall on the same date every year.

The rise in claims helped push up the four-week moving average, a more reliable indication of job market health because it smoothes out the weekly volatility in the weekly figures, to 430,500 from 427,500 in the prior week.

The four-week average has been stuck above the key 400,000 mark - a sign the labor market is struggling - for 14 weeks.

Many economists had been predicting the swift U.S.-led victory in the Iraq war to dispel consumer and business blues and pump energy into an economy that has been slow to recover.

"The currency market, especially the euro and the dollar, in the wake of the ECB rate cut is back to where we started: a still soft U.S. economy, with prospects for Fed easing", Patterson said, referring to the European Central Bank's decision on Thursday to cut its key interest rates by a half-point to 2%.

Wall Street economists are awaiting the U.S. May unemployment data, due out Friday, for any clues on the possibility of a interest rate cut by the Federal Reserve.

Fed Chairman Alan Greenspan on Tuesday hinted at an interest-rate cut when he said it might be wise to lower borrowing costs as "insurance" against economic weakness.

The unemployment rate for May is expected to be uncomfortably high, rising to 6.1% from 6.0 the previous month, as companies lack confidence in the economy to expand their workforce. Shrinkage in payrolls is expected to slow to a 39,000 decline after a 48,000 drop in April.

In Thursday's report, the number of people still drawing a week of benefits fell 18,000 to 3.7 million in the week to May 24, the latest week for which data are available. However, the so-called continued claims remain stubbornly high.