WASHINGTON The number of newly laid off workers seeking unemployment benefits jumped unexpectedly last week, the government said Thursday, reversing three weeks of declines.
The Labor Department reported that new applications for unemployment insurance rose to a seasonally adjusted 444,000, up 15,000 from the previous week. Economists had expected claims to drop to 420,000.
The increase indicates that the slowing economy is taking its toll on the job market. Many economists consider claims above 400,000 to be a sign of a weak economy. Initial claims stood at 320,000 in the same week last year.
The four-week moving average fell slightly to 438,000, down 3,250 from the previous week.
The number of people continuing to receive unemployment benefits also rose slightly to 3.44 million for the week ending Aug. 23, up 6,000 from the previous week. That number doesn't include people who have exhausted their regular benefits and have requested extended assistance under an emergency program.
Separately, the Labor Department reported that productivity, the amount of output for every hour of work, rose at a 4.3 percent annual rate in the April-June quarter, a full percentage point higher than economists expected.
Meanwhile, labor costs fell 0.5 percent, the department said. The combination of higher productivity with lower costs should help contain inflation and give the Federal Reserve some breathing room on credit policy.
Caught between slowing growth and rising prices, the Fed is expected to leave a key interest rate alone at 2 percent when it meets next on Sept. 16.
Retail sales were mixed, with many stores reporting sluggish back-to-school sales, though Wal-Mart Stores Inc. sales came in better than analysts expected.
While Thursday's jobless claims figure is below the six-year high of 457,000 reached in late July, economists attributed some of that increase to an outreach program by the Labor Department to notify individuals about the availability of extended benefits. Congress approved the extra benefits in June.
But several economists have said the distortions from that program have likely faded. A Labor Department analyst also said the figures don't include any impact from Hurricane Gustav.
The unexpected jump could foreshadow more rough news for the job market on Friday, when the Labor Department reports monthly unemployment numbers. Economists expect the department to say that employers eliminated 75,000 jobs in August, which would be the eighth straight month of job cuts.
The department is also expected to report that the unemployment rate rose to 5.8 percent from 5.7 percent in July.
Increased unemployment can crimp consumer spending as laid off workers and those who fear for their jobs cut back on their purchases. That, in turn, can further weaken the economy.
Concerns about that spread to the stock market Thursday. Wall Street headed for a lower open after the jobless claims data. Oil prices advanced for the first time this week, which also weighed on investors.
While the U.S. gross domestic product grew at a healthy 3.3 percent clip in the April to June quarter, many analysts expect the economy to slow and possibly contract later this year, due to rising unemployment and slowing economies overseas.
Separately, this summer saw the highest level of job cuts in six years, according to a report released Wednesday by job placement consultancy Challenger, Gray & Christmas.
Employers eliminated 377,325 jobs in the May to August period, the firm said, up from 249,197 in the summer of 2007.
GMAC Financial Services said Wednesday it will lay off 5,000 workers as part of a plan to scale back its mortgage lending. GMAC is majority owned by private equity firm Cerberus Capital Management LP while General Motors Corp. holds a large stake.
Meanwhile, Freightliner LLC, a heavy truck subsidiary of German automaker Daimler AG, said last week it would cut 100 jobs.