The number of newly laid-off workers filing claims for jobless benefits rose more than expected last week, as employers remain reluctant to hire even with the economy showing signs of recovery.
Claims had fallen in five out of the previous six weeks and most economists expect that trend to continue, but at a slow pace, as jobs remain scarce.
The report is "slightly disappointing," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients, "but it does not change the core story, which is that ... a clear downward trend in claims has emerged" over the past two months.
The Labor Department said Thursday that new jobless claims rose to a seasonally adjusted 531,000 last week, from an upwardly revised 520,000 the previous week. Wall Street economists had expected only a slight increase, according to Thomson Reuters.
Among the states, Florida had the largest increase in claims, with 9,976, which it attributed to layoffs in the construction, service, manufacturing and agriculture industries. New York, Wisconsin, Indiana, and Arkansas had the next largest increases. The state data lag initial claims by one week.
California reported the largest drop in claims, down 7,062, which it attributed to fewer layoffs in the construction, service, and manufacturing industries. Tennessee, Maine and Nebraska also reported decreases.
Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies' willingness to hire new workers.
The four-week average of claims, which smooths out fluctuations, fell slightly to 532,250, the lowest since mid-January and about 125,000 below the peak for the recession, reached this spring. But claims remain well above the 325,000 that economists say is consistent with a healthy economy.
The claims figures indicate the economy is shedding fewer jobs, economists said. The drop in initial claims since last month signals that employment losses likely will be below 200,000 in October, the lowest since August 2008, several economists said.
Employers cut 263,000 positions in September, the Labor Department said earlier this month, as the unemployment rate rose to 9.8 percent from 9.7 percent in August. The October report will be released Nov. 6.
The stock markets dipped in morning trading. The Dow Jones industrial average slipped about 11 points, while broader indexes also fell slightly.
The number of people continuing to claim benefits did drop for the fifth straight week to 5.9 million, from just over 6 million. The figures on continuing claims lag initial claims by a week.
Many recipients are moving onto extended benefit programs approved by Congress in response to the recession, which began in December 2007 and is the worst since the 1930s. Those extensions add up to 53 weeks of benefits on top of the 26 typically provided by the states.
When those programs are included, the total number of recipients dropped to 8.8 million in the week ending Oct. 3, the latest data available, down about 50,000 from the previous week. That decline is likely due to recipients running out of benefits, rather than finding jobs, economists say.
The National Employment Law Project, an advocacy group, estimates that about 1.3 million people will exhaust their benefits by the end of this year. Congress is considering adding another 14 to 20 weeks of support, but that bill has been delayed in the Senate.
Many analysts expect the economy grew as much as 3 percent in the July-September quarter, but employers are reluctant to hire as they wait to see if such growth can be maintained.
More job cuts were announced this week. Sun Microsystems Inc. said it plans to eliminate up to 3,000 jobs, or 10 percent of its worldwide work force, as it awaits a takeover by Oracle Corp., a deal being held up by antitrust regulators in Europe.