Published: Thursday, 12 Nov 2009 | 10:26 AM ET

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The number of U.S. workers filing new claims for jobless benefits last week fell to the lowest level since January, the government said Thursday, showing the hard-hit labor market may be slowly improving.

Initial claims for state unemployment insurance dropped to 502,000 in the week ended Nov. 7 from a revised 514,000 the prior week. Analysts polled by Reuters had expected claims to slip to 510,000 from an initially reported 512,000.

"It shows that companies are cutting jobs at a slower pace than during the financial crisis," said Gary Thayer, chief macrostrategist for Wells Fargo Advisors in St. Louis. "We're trending in the right direction, but we are probably several months away from (rising) monthly payrolls numbers."

The U.S. economy lost 190,000 jobs last month and the unemployment rate hit a 26-1/2 year high of 10.2 percent. While employers are cutting jobs at a slower pace than they were at the start of the year, economists expect the jobless rate to trend higher before peaking in mid-2010.

Rising unemployment is causing a political headache for President Barack Obama and his fellow Democrats, even though the economy appears to have snapped out of its deepest downturn since the 1930s with growth at an annual rate of 3.5 percent in the third quarter.

The Democratic Party lost two state governorships to Republicans in elections this month that focused heavily on the economy, and mid-term elections in November 2010 could eat into the majority Democrats enjoy in Congress.

Obama has said his administration is considering a number of options to spur job growth, including ramping up government infrastructure spending and new business tax cuts.

On Thursday, he announced the White House would hold a forum on jobs growth in December.

"We all know that there are limits to what government can and should do even during such difficult times, but we have an obligation to consider every additional responsible step that we can to encourage and accelerate job creation in this country," Obama said.

While initial claims for jobless benefits are down sharply from their March peak of 674,000, analysts say they need to drop below 400,000 to offer a signal of job creation.

"The larger question is, are new jobs becoming available? I don't think they are, and that's why I don't think the market will celebrate this today," said Bruce Bittles, chief investment strategist for Robert W. Baird & Co in Nashville, Tenn.

The four-week moving average of new claims, considered a better gauge of underlying trends as it irons out week-to-week volatility, decreased to 519,750, the lowest since the week ended Nov. 29, 2008. It has been dropping since August.

The number of workers still collecting benefits after an initial week of aid also fell. These so-called continued claims dropped to 5.631 million in the week ended Oct. 31, the most recent week for which data is available, the lowest level since March.

• Slideshow: Where the Jobs Are

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