New jobless claims dip for third straight week

By CHRISTOPHER S. RUGABER AP Economics Writer

WASHINGTON (AP) - New claims for jobless benefits fell for the third straight week but remain elevated, suggesting the labor market is still sluggish.

New claims fell by 3,000 to a seasonally adjusted 456,000, the Labor Department said Thursday. That's nearly the same level as in January.

At the same time, the tally of laid-off workers continuing to claim jobless benefits fell by the largest amount in almost a year. That could be because more people are finding work. But it may simply mean that they have exhausted their initial state benefits and have transitioned to extended federal benefits.

A Labor Department analyst said state agencies didn't provide any explanation for the drop.

In another report, the Commerce Department said the U.S. trade deficit rose to the highest level in 16 months as exports fell for the second time in three months. That's a potentially worrisome sign that Europe's debt troubles are beginning to crimp American manufacturers, which could impact the U.S. job market.

First-time claims have hovered near 450,000 since the beginning of the year after falling steadily in the second half of 2009. That has raised concerns among economists that hiring remains weak and could slow the recovery.

Economists look closely at the total number of people claiming benefits. They monitor those who are initially receiving 26 weeks of state benefits, on average. But they are also concerned about the number of people who have transitioned to extended federal unemployment benefits, which can last up to 73 additional weeks.

Nearly 5.4 million Americans are receiving extended benefits. All told, about 9.8 million people drew unemployment in the week ending May 22, the latest data available.

That total is likely to drop in the coming weeks. The extended benefit program expired in early June, and Congress is debating whether to continue it through the end of November.

About 325,000 people will lose unemployment aid by the end of this week due to the cutoff, the department estimates. That total could grow to 1.25 million by the end of the month if the extension isn't passed.

Last week, the Labor Department said the economy generated only 41,000 private-sector jobs in May, down from 218,000 in April.

Temporary census hiring added another 411,000 jobs, and the unemployment rate fell to 9.7 percent from 9.9 percent.

The economy is expanding, but at a weaker pace than in many previous recoveries. The Commerce Department said earlier this month that the nation's gross domestic product - the broadest measure of economic output - grew at a 3 percent annual rate in the January-to-March quarter. That was down from the 5.6 percent pace in the fourth quarter of 2009.

After the last deep recession in the early 1980s, the economy grew at a pace of 7 percent to 9 percent for five straight quarters.