(Updates to midmorning)

By Leah Schnurr

NEW YORK (Reuters) - U.S. stocks slipped Thursday
after an unexpected rise in first-time claims for jobless
benefits underscored concerns that the recovery in the labor
market will be slow.

The report added to unease ahead of Friday's closely
watched monthly jobs report and prompted a mild retreat by
investors. A smaller-than-expected rise in retailers'
same-store sales also weighed on stocks as investors worried
about consumer spending, the other weak spot in the recovery.

Government data showed initial jobless benefit claims rose
to 479,000 last week, defying analysts' expectations for a
slight decline from the previous week, and offsetting
Wednesday's optimism that the private sector created more jobs
than expected last month.

"The bottom line is that any recovery in employment is
going to be very slow," said Scott Wren, senior equity
strategist at Wells Fargo Advisors in St. Louis.

The Dow Jones industrial average dipped 26.87
points, or 0.25 percent, to 10,653.56. The Standard & Poor's
500 Index was off 3.42 points, or 0.30 percent, to
1,123.82. The Nasdaq Composite Index lost 7.25 points,
or 0.31 percent, to 2,296.32.

Energy shares led the way down as oil prices fell for a
second day toward $82 a barrel. Exxon Mobil Corp shed
1.2 percent to $61.97, while the S&P energy index was
off 0.6 percent.

July sales at retailers rose but mostly came in below
expectations as consumers cut spending to focus on essentials.
Teen apparel stores saw some of the biggest disappointments as
shoppers held off on back-to-school items. Among the laggards,
Hot Topic Inc tumbled 4.9 percent to $5, and the
Morgan Stanley retail index slipped 0.3 percent.

"The rhetoric had gotten people fueled up that they were
going to start getting back-to-school sales earlier, and it
just didn't happen," said Marc Pado, U.S. market strategist at
Cantor Fitzgerald & Co in San Francisco.

Economists are forecasting Friday's U.S. Labor Department
report to show a drop of 65,000 in payrolls in July as U.S.
Census Bureau jobs dried up. Private employers are expected to
have added 90,000 jobs.
(Additional reporting by Matthew Lynley; Editing by Padraic
Cassidy)