The number of newly laid off workers filing claims for unemployment benefits in the United States rose unexpectedly last week as the recovery of the nation's battered labour market proceeds in fits and starts.

Job brochures are seen on display at a state unemployment office in Sunnyvale, Calif. The Labour Department said Thursday that the number of new jobless claims rose to 480,000 last week. (Paul Sakuma/Associated Press)

The Labour Department said Thursday that the number of new jobless claims rose to 480,000 last week, up 7,000 from the previous week. That was a worse performance than the decline to 465,000 that economists had expected.

The four-week average for claims, which smooths out fluctuations, did fall, dipping to 467,500, the 15th straight decline, viewed as an encouraging sign that the labour market is gradually improving. The four-week average is now at its lowest point since late September 2008, the period when the financial crisis was hitting with full force.

Unemployment claims have been on a downward trend since this summer. That improvement is seen as a sign that jobs cuts are slowing and hiring could pick up as soon as early next year. But the rise in weekly claims of 7,000 last week, which had followed an increase of 19,000 the previous week, shows that the improvement has been halting.

Economists closely monitor jobless claims, which are considered a key gauge of the pace of layoffs with continuing claims viewed as an indication of how quickly laid off workers are getting new jobs. Analysts believe that claims need to fall to about 425,000 for several weeks to signal the economy is actually beginning to add jobs.

The government said that the number of people receiving regular benefits rose by 5,000 to 5.19 million for the week ending Dec. 5. That figure does not include millions of people who have used up the regular 26 weeks of benefits typically provided by the state and are now receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

The people receiving extended benefits jumped to 4.73 million for the week ending Nov. 28, an increase of 143,759 from the previous week. That big rise reflected the fact that a total of 17 states are now processing claims for the extension of benefits that Congress approved last month.

Fed maintains stimulus

The economy grew at a 2.8 per cent annual rate in the July-September quarter, the first growth in the gross domestic product after a record four straight quarters of shrinking GDP. A recent string of more positive reports is causing some analysts to revise higher their forecasts for growth in the current quarter to three per cent or slightly better.

However, the concern is that unless unemployment starts to come down in a sustained way, consumer spending, which accounts for 70 per cent of economic activity, will begin to falter, putting in jeopardy the fragile recovery from the nation's longest recession since the 1930s.

The jobless rate did dip in November to 10 per cent, down from a 26-year high of 10.2 per cent in October. But analysts are worried that unemployment will resume rising in coming months and will not peak until hitting 10.5 per cent next summer. However, the November jobless report did show that businesses slashed their payrolls by just 11,000 jobs on net in November, the smallest decrease since the recession began two years ago.

Federal Reserve officials on Wednesday concluded their final meeting of the year with a decision to hold interest rates at "exceptionally low levels" for an extended period. The Fed has kept its key federal funds rate at a record low near zero per cent for the past year and many economists don't look for any increases until the unemployment rate begins to move lower on a consistent basis.

In its assessment of the economy, Fed officials noted that economic activity was continuing to pick up and the pace of layoffs has been slowing.

There were 29 states with increases of more than 1,000 claims for the week ending Dec. 5 led by California, with a rise of 28,353, which it attributed in part to the fact that the unemployment offices were open for the full week giving applicants more time to file following the Thanksgiving holiday. Other states with big gains were Georgia, North Carolina, Pennsylvania and New York.

The two states with declines of more than 1,000 were Kansas, with a drop of 3,803, and Kentucky, down by 2,048.