The number of newly laid-off Americans filing first-time claims for jobless benefits fell to the lowest level since early January, as layoffs eased a bit amid a fledgling economic recovery.
The fourth drop in new claims in five weeks is a sign the labor market is slowly healing. But employers are reluctant to hire new workers and the unemployment rate is expected to keep climbing well into next year.
Separately, America's retailers saw modest signs of life from consumers in September, resulting in the first sales gain since July 2008 and fueling some hope for the holiday shopping season.
The Labor Department said Thursday that new claims for unemployment insurance dropped last week to a seasonally adjusted 521,000, better than analysts expected and down from 554,000 the previous week.
The four-week average, which smooths fluctuations, fell to 539,750, the lowest since Jan. 17. The number of people continuing to claim benefits declined by 72,000 to 6.04 million. Analysts expected continuing claims to rise slightly.
"The downtrend in claims is encouraging and points to continued, albeit gradual, improvement in the labor market," Joseph LaVorgna, chief U.S. economist at Deutsche Bank, wrote in a note to clients.
Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies' willingness to hire new workers.
Despite the improvement, initial claims remain well above the 325,000 that economists say is consistent with a healthy economy.
Meanwhile, a late Labor Day and delayed school openings helped boost back-to-school sales in September. The International Council of Shopping Centers-Goldman Sachs preliminary tally registered an increase of 0.1 percent for September, compared with a 1 percent drop a year ago. While still tepid, the results mark the first gain since July 2008, when the index rose 1.3 percent.
As stores announced their results Thursday, J.C. Penney Co., Macy's Inc., and Target Corp. all reported smaller-than-expected declines in sales at stores open at least a year. Limited Brands Inc., which runs Victoria's Secret and Bath & Body Works, and accessories chain The Buckle Inc. both posted increases for the month.
Still, industry worries remain high heading into the holiday shopping season because shoppers, many of whom were afraid to spend a year ago, are now grappling with rising job losses, reduced hours or unavailable credit.
The stock market rose in early afternoon trading. The Dow Jones industrial average added about 100 points, and broader indexes also gained.
In a third report, the Commerce Department said businesses reduced inventories at the wholesale level for a record 12th straight month in August. In an encouraging sign, sales jumped by the largest amount in 14 months.
Economists hope the rising sales will persuade businesses to begin restocking their depleted shelves, a switch that would boost factory production and help bolster broad economic growth in coming months.
The jobless claims figures indicate that layoffs are slowing. Employers eliminated a net total of 263,000 jobs in September, the Labor Department said last week. Many economists expect that number to decline this month.
When federal emergency programs are included, the total number of jobless benefit recipients dropped by about 90,000 to 8.9 million in the week that ended Sept. 19, the latest data available. Congress has added up to 53 extra weeks of benefits on top of the 26 typically provided by the states, and is considering adding another 13 weeks.
Many analysts expect the economy grew as much as 3 percent in the July-September quarter, but most employers are likely to hold back on new hires while they wait to see if such growth can be maintained.
The unemployment rate rose to 9.8 percent in September from 9.7 percent, the department said last week, the highest in 26 years. The recession, the worst since the 1930s, has eliminated a net total of 7.2 million jobs.
Federal Reserve Chairman Ben Bernanke said last week that even if the economy maintained a 3 percent growth rate for several quarters, unemployment would still be above 9 percent by the end of 2010.
More job cuts were announced this week. Thermo Fisher Scientific Inc., which makes industrial and scientific equipment, said it will close a plant in Dubuque, Iowa, next year, costing 350 jobs.