U.S. jobless claims up modestly, labor market trend improving

The number of Americans filing new claims for unemployment benefits rose marginally last week, but the underlying trend suggested the labor market continued to steadily improve.

Initial claims for state unemployment benefits ticked up 1,000 to a seasonally adjusted 326,000, the Labor Department said on Thursday. Claims for the prior week were revised to show 1,000 fewer applications received than previously reported.

Economists polled by Reuters had expected first-time applications for jobless benefits to hold steady at 326,000 in the week ended January 18.

The four-week average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell 3,750 to 331,500.

A Labor Department analyst said claims for the District of Columbia and Kentucky had been estimated and noted there were no special factors affecting the state level data.

Last week's claims report covered the survey period for January nonfarm payrolls data. The four-week average for new claims fell 12,250 between the December and January survey periods, suggesting some acceleration in job growth this month.

Employers added only 74,000 new jobs to their payrolls in December after creating 241,000 positions the prior month. That was at odds with other employment indicators that suggested a brisk pace of hiring in December.

Economists have dismissed the sharp step-back in job growth as a fluke, noting that a cold snap during the month weighed on construction, transportation and utilities payrolls.

But with the weather also unseasonably cold in January, employment in these sectors likely remained subdued this month.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 34,000 to 3.06 million in the week ended January 11.

A total of 3.71 million people were receiving benefits under all programs in the week ended Jan 4. Benefits for 1.35 million long-term unemployed Americans expired on December 28.

Economists expect the expiration of these benefits to push the unemployment rate, currently at 6.7 percent, lower as some of the former recipients drop out of the labor force or are forced to take up low paying jobs that they previously would not have considered.

Should the unemployment rate drop because former recipients of jobless benefits have dropped out of the labor force, that could pose problems for the Federal Reserve, which has put the unemployment rate at the center of monetary policy.

The Fed has said it will hold interest rates near zero at least until the jobless rate drops to 6.5 percent. But if a big part of the decline reflects people dropping out of the labor force, that could be seen as a sign of weakness, not strength.

(Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci)