The number of laid-off workers filing claims for unemployment benefits showed an unexpected improvement last week although a key indicator of unemployment hit a four-year high.
The Labor Department reported Thursday that applications for unemployment benefits totaled 357,000 last week, some 18,000 fewer than the previous week. That pushed applications for benefits to their lowest level since mid-April.
However, the four-week average for people receiving benefits edged up to 3.086 million, the highest level since March 6, 2004, when the country was still struggling to recover from a prolonged period of rising unemployment.
The increase in so-called continuing claims underscored the problems people are facing with rising layoffs and the difficulty in finding new jobs in a weak economy.
Some analysts said the better-than-expected showing was an aberration that reflected problems the government has in adjusting the claims figures around holidays. Last week covered the Memorial Day holiday when state claims offices were closed.
"Claims will rebound over the next couple of weeks and the underlying trend will continue to grind slowly higher," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The unemployment report for May will be released on Friday. Analysts are expecting that the overall civilian jobless rate will edge up to 5.1 percent, compared to 5 percent in April, and that businesses will have cut 60,000 jobs, marking the fifth straight month of job losses.
This prolonged stretch of job cuts has many economists believing the country has fallen into a recession.
However, the overall economy as measured by the gross domestic product has managed to remain in positive territory with the GDP growing at an annual rate of 0.9 percent in the first three months of the year.
In other economic news, reports from major chain stores showed that consumers stepped up their shopping in May after tax rebate checks started appearing in mailboxes. Discount and lower-priced stores such as Costco Wholesale Corp and Wal-Mart Stores Inc. were among the strongest performers.
The Bush administration is hoping that the $168 billion economic stimulus program which is mailing checks to some 130 million households and showering businesses with tax breaks will be enough to jump-start the economy and result in stronger growth in coming months.
In a speech Thursday at Harvard, Federal Reserve Chairman Ben Bernanke said he believed the economy was in a good position to weather the current hardships, including soaring energy prices. He said he believes this because there is flexibility in this realm than when the economy was hit with a series of oil shocks in the 1970s.
The drop of 18,000 jobless claims applications last week was much better than the unchanged performance that economists had been expecting.
For the week ending May 24, a total of 31 states and territories reported that claims had declined, while 22 reported increases.
The states with the biggest increases were Ohio, up 2,390, because of higher layoffs in the auto, transportation and service industries, and Mississippi, with a rise of 2,028, reflecting higher layoffs in the auto industry.
The states with the biggest declines were Michigan, with a drop of 1,880, reflecting fewer layoffs in the auto industry in that state, and Pennsylvania, with a drop of 1,120, reflecting fewer layoffs in petroleum, primary metals and the furniture industry.