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New claims for jobless benefits rose last week in a sign that US businesses remain hesitant about hiring ahead of the Christmas trading season.
Initial jobless claims increased by 2,000 to 439,000, the labour department said. In spite of the rise, it was a smaller increase than economists had expected and left the less volatile four-week average of new claims down 4,000 to 443,000.
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Jobless claims have been an inconsistent indicator in recent months, remaining elevated in spite of gradual improvement in private sector employment. However, the monthly average of new claims and the number of unemployed workers continuing to make claims are at their lowest levels in roughly two years.
Economists argue that new claims need to fall to a low of 400,000 before the economy can sustainably add jobs.
Continuing claims, which do not include people making emergency filings for benefits, declined by 48,000 to 4.3m.
Market reaction was muted after the figures were released on Thursday as investors focused their attention on the possibility that Ireland could be bailed out.
The dollar was 0.7 per cent lower against a trade-weighted basket of currencies and the yield on benchmark US 10-year Treasuries held its gains, up 4 basis points to 2.91 per cent. S&P 500 futures remained higher by 1.1 per cent at 1,190.00.
An extension of unemployment insurance is expected to provoke even more contentious debate in Congress next year now that Republicans control the House of Representatives.
Some analysts argue that overly generous jobless benefits aggravate unemployment, which sits near 10 per cent, by reducing the urgency among the jobless to find work.
However, the labour department released a study this week finding that every $1 spent on unemployment insurance increases economic activity by $2 and that benefits reduced the decline in gross domestic product during the recession by 18 per cent.
“Unemployment insurance is one of the best investments we can make, not only for the millions of people that utilise UI benefits to provide for their families in a time of need, but for the millions more whose jobs are kept secure because of the stabilising effect it has on our economy as a whole,” said Hilda Solis, labour secretary.
Last week, job losses were concentrated in North Carolina, Pennsylvania and Michigan, with the construction sector hit the hardest.
