Initial jobless claims drop slightly

First-time claims for jobless benefits fell slightly last week, a reflection of the fragility of the labor market. 

Weekly applications for unemployment insurance dropped by 2,000 to a seasonally adjusted 387,000, down from an upwardly revised 389,000, the Labor Department reported Thursday. 

The four-week average, a less volatile measure than the weekly figure, continued a monthlong climb up to 386,250, reaching its highest point since Dec. 3.

Applications are stuck above 375,000, a level that economists say reflects a healthy job market and means the unemployment rate will fall. 

The economy was adding jobs at a fast clip during the last few months of 2011 and into the spring before labor market activity slowed to a crawl. 

Employers added 69,000 workers to their payrolls in May, the lowest level this year, raising concerns that the economic recovery was weakening. The monthly June report is due out July 6. 

But economists have said they expect hiring to pick up again this summer after a lull through the spring that they consider "payback" for the rapid growth over the warm winter, which shifted some hiring. 

The Federal Reserve on Wednesday announced a $267 billion, six-month extension of its effort to boost the economy. Fed Chairman Ben Bernanke warned Congress again that it must act to avert a "fiscal cliff" of tax hikes and spending cuts.

Bernanke acknowledged that hiring remains slow, saying that recent economic data has been “somewhat disappointing." 

But he said it was still too soon to determine the direction of the economy and whether job creation will remain a problem or pick up again this summer. 

Fed officials downgraded their expectations for economic growth and the nation's unemployment rate. They expect the economy will grow by less than 3 percent until 2014, down slightly from April expectations.

They also expect unemployment to remain stuck above 8 percent for the rest of the year, and above 7 percent through 2014. 

However, officials do not see inflation as a major threat, holding steady below 2 percent for the foreseeable future.