Initial unemployment claims unexpectedly rise

The labor market continues to confound as initial unemployment claims rose unexpectedly for the second straight week to a three-month high. 

First-time applications for unemployment benefits were up by 25,000 to a seasonally adjusted 429,000 for the week ending April 23, the highest level since the end of January, the Labor Department said Thursday. 

The four-week average of applications, a less volatile measure than the weekly figure, increased by 9,250 to 408,500 from the previous week's revised average of 399,250, the third straight increase and the first time claims have eclipsed 400,000 in two months.

Still, economists expect the economy to add about 200,000 jobs in April, right about the same as the 216,000 in March when the unemployment rate fell to 8.8 percent, a two-year low. 

Claims had been steadily dropping for the past six months, finally falling below the 400,000 mark, a level economists say showed sustained job growth, after hitting a peak of 659,000 during the recession. 

All signs have been pointing to lower levels of unemployment with companies saying they're going to increase their payrolls and some moving forward. 

Yet initial claims have stubbornly continued to rise although the number of people receiving regular and extended federal benefits has been dropping, which is a possible signal that more people will find work in the coming months, according to the Labor report.

There was some concern that auto-related layoffs brought on by the earthquake in Japan would affect this week's numbers, but the Labor Department showed that one state reported only limited layoffs. 

In a separate report, economic growth slowed sharply in the first three months of the year, to 1.8 percent, well behind the 3.1 percent pace of the fourth quarter of 2010, the Commerce Department said. 

The reports come a day after Federal Reserve Chairman Ben Bernanke said the economy is steadily recovering but a faster expansion is being hampered by high unemployment. Bernanke, who said interest rates will stay near zero for an extended period, said the Fed can't do much more than its program to buy $600 billion in Treasury bonds without risking higher inflation. 

Gas and food prices have risen sharply in recent months, but Bernanke has said the changes are temporary and won't likely have long-term implications on the economy. 

On the job front, the total number of people claiming benefits in all programs for the week ended April 9 was about of 8.2 million, a decrease of 112,578 from the previous week.

The number of people collecting benefits dropped by 68,000 to 3.7 million during the week ended April 16, the lowest number since September 2008. The figure doesn't include workers receiving federal extended and emergency benefits.

The number of workers who have exhausted their 26 weeks of state benefits and have moved on to federal programs decreased by about 76,400 to 4.165 million in the week ended April 9.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 2.9 percent from 3 percent the prior week.

Overall, 43 states and territories reported an decrease in claims, while 10 had a decrease.

The largest increases in initial claims for the week ending April 16 were in Florida (+2,753), Puerto Rico (+1,121), New Mexico (+680), New Jersey (+490), and Colorado (+481), while the largest decreases were in California (-18,017), North Carolina (-5,871), Pennsylvania (-4,925), Kentucky 
(-4,267), and Texas (-3,882).