UPDATE 1-U.S. jobless claims highest in more than 26 years

Thu Apr 2, 2009 9:01am EDT

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WASHINGTON, April 2 (Reuters) - The number of U.S. workers filing new claims for jobless benefits surged to a nearly 26-1/2 year high last week, data showed on Thursday, indicating that the pace of job losses was yet to peak.

At the same time, the number of laid-off workers collecting state unemployment benefits jumped to a record high in March, the Labor Department said, as the recession now in its 16th month makes it tough to find a new job.

New applications for state jobless insurance benefits rose 12,000 to a seasonally adjusted 669,000 in the week ended March 28, the highest since the week ending Oct. 2, 1982, from an upwardly revised 657,000 the week before.

Analysts polled by Reuters had forecast 650,000 new claims versus a previously reported count of 652,000 the prior week.

U.S. stock index futures pared gains after the data, while government bond prices held steady at lower levels.

"We have been seeing not just an elevated trend but an increasing trend. That is not good. We know the labor market is going to be a lagging indicator, but we need to see the pace of job losses moderate soon if we are going to get a recovery," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida.

Highlighting the difficulties of getting a new job, the number of people staying on the benefits roll after collecting an initial week of aid surged 161,000 to 5.73 million in the week ended March 21, the latest week for which the data is available, from 5.57 million the previous week.

This was the highest on record and lifted the insured unemployment rate to 4.3 percent, the highest since a matching 4.3 percent in the week ending May 21, 1983. The insured unemployment rate was at 4.2 percent in the week ended March 14.

"What it says to me is the persistence of unemployment," said T.J. Marta, chief market strategist at Marta on the Markets in Scotch Plains, New Jersey.

"It's more of a structural reallocation of resources, which could be worse than anything we've seen since the Great Depression," he said.

The four-week moving average for new claims, considered to be a better gauge of underlying trends as it irons out week-to-week volatility, climbed 6,500 to 656,750 in the week ending March 28, from 650,250. That was the highest reading since October 1982. (Additional reporting by John Parry and Richard Leong in New York; Editing by Andrea Ricci)

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