Unemployment benefit applications fell 16,000 to a seasonally adjusted 414,000, the second drop in three weeks, the Labor Department said Thursday. That's a positive sign that layoffs are slowing.
Still, applications have been above 400,000 for 10 straight weeks, evidence that the job market is weak compared to earlier this year.
Applications had fallen in February to 375,000, a level that signals sustainable job growth. They stayed below 400,000 for seven of nine weeks. But applications surged in April to 478,000 — an eight-month high — and they have declined slowly since then.
The four-week average, a less volatile measure, was unchanged.
Economists said the report signals that the job market is improving, but at a very slow pace.
"This is not a derailing of the economy," said Bricklin Dwyer, an economist at BNP Paribas. "This is a period of weak growth, and we're going to see this for some time."
Separately, builders broke ground on more new homes in May, but not enough to signal a recovery in the housing market. New-home construction rose 3.5 percent from April to a seasonally adjusted annual rate of 560,000 units per year, the Commerce Department said Thursday. Economists say the pace of construction is far below the 1.2 million new homes per year that must be built to sustain a healthy housing market.
The elevated level of applications suggests that companies pulled back on hiring in the face of higher gas and food prices, which have cut into consumer spending. Hiring has slowed sharply since applications rose.
Employers added only 54,000 net new jobs in May, much slower than the average gain of 220,000 per month in the previous three months. The unemployment rate rose to 9.1 percent from 9 percent.
Employers probably added more jobs in June than in May, but less than the 220,000 pace earlier this year, economists said.
The economy needs to generate at least 125,000 jobs per month just to keep up with population growth. At least twice that many are needed to bring down the unemployment rate.
But economists forecast the nation will add only about 1.9 million jobs this year, according to an Associated Press Economy survey earlier this week. That's only about 150,000 per month and is lower than a previous estimate two months ago.
The number of people receiving unemployment benefits dropped 21,000 to 3.68 million, the lowest in two months. But that doesn't include the millions of additional unemployed Americans receiving benefits under emergency benefit programs put in place during the recession. All told, 7.4 million people received benefits during the week ending May 28, the latest data available. That's about 200,000 fewer than the previous week.
More hiring is important because it's key to boosting consumers' incomes, which in turn would fuel more spending. Consumer spending grew at a weak 2.2 percent annual rate in the January-March quarter, down from 4 percent in the previous quarter. That pushed down economic growth to 1.8 percent from 3.1 percent.
Yet some companies are cutting jobs. Johnson & Johnson said Wednesday that it will stop making some of its heart devices because sales have fallen, a move that will eliminate up to 1,000 positions. Some of those cuts will be overseas.
And state and local governments are laying off thousands of employees in order to close large budget deficits. On Tuesday Los Angeles' school district approved a plan that would cut 2,000 jobs in the 2011-2012 school year.