WRAPUP 3-US jobless claims fall, but slow recovery seen

* Jobless claims fall a bit less than expected

* Four-week average rises for fourth straight week

* Continuing claims dip for second week (Adds unemployment hearing, updates markets to close)

By Lucia Mutikani

WASHINGTON, April 29 (Reuters) - The number of U.S. workers submitting new claims for unemployment benefits fell slightly last week, implying only a gradual labor market improvement even as the economic recovery broadens out.

While the data on Thursday did not change views that employers probably added to payrolls this month, analysts were disappointed with how slowly claims were declining and said it showed companies were reluctant to embark on a hiring spree.

Initial claims for state unemployment benefits fell 11,000 to a seasonally adjusted 448,000, the Labor Department said. That was slightly below market expectations for 445,000.

"Some companies are still struggling and believe they can meet any increase in demand with a smaller workforce. The recovery in the labor market is probably going to be more modest than a lot of people are expecting," said Paul Dales, a U.S. economist at Capital Economics in Toronto.

The Federal Reserve on Wednesday acknowledged the labor market was improving, but noted that employers remained reluctant to add payrolls. The U.S. central bank left overnight benchmark lending rates near zero and renewed its commitment to keep them low for an extended period.

Economists are concerned that claims remain above 400,000, a level they say is historically associated with a steady pace of job growth. Analysts anticipate data next week will show the unemployment rate was unchanged at 9.7 percent in April for a fourth straight month.

The report had little effect on U.S. stocks, which climbed for a second day on a string of robust earnings and as debt-ridden Greece appeared near to a bailout deal. For Wall Street, it was the best day in almost two months. Hopes of a Greek bailout pushed the U.S. dollar down against the euro.

UNEMPLOYMENT TO REMAIN HIGH

Though the manufacturing-led U.S. economic recovery is spreading out to other sectors, it is probably not vigorous enough to encourage much hiring. Indications are that unemployment will likely remain elevated for a while.

Gross domestic product data on Friday is expected to show the economy grew at a 3.4 percent annual rate in the first quarter, with much of the advance due to consumer spending, according to a Reuters survey.

While slower than the fourth-quarter growth at an annual pace of 5.6 percent, it will be the third straight quarter of expansion as the economy climbs out of the worst downturn since the 1930s.

Harvard Professor Lawrence Katz, a leading economist, told lawmakers on Thursday that the labor market damage from the recession was so severe that the economy would struggle to create jobs even with a strong recovery.

"We need over three hundred and thirty-two thousand net new jobs per month sustained for the next 45 months to make up for the two years of severe job losses in the Great Recession," Katz said.

"This would require even stronger employment growth than the 2.4 percent per year in the robust 1993 to 2000 recovery and expansion."

About 8.2 million people have lost their jobs since the recession struck in December 2007.

The four-week moving average of new claims, seen as a more reliable barometer of labor market trends, rose 1,500 to 462,500 last week, the Labor Department said. It was the fourth straight weekly increase.

Private hiring last month handed the economy its largest job gain in three years. While analysts believe payrolls grew again in April, they expect much of the boost to come from government hiring for the 2010 Census. In the United States, the Census is taken every 10 years.

"We expect nonfarm payroll hiring of 175,000 for April, consisting of underlying hiring of 50,000 and a Census contribution of 125,000," wrote economists at Goldman Sachs.

The number of people still receiving benefits after an initial week of aid fell to 4.65 million in the week ended April 17, a touch above market expectations for 4.62 million.

The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, was unchanged at 3.6 percent in the week ended April 17.

Separately, the Chicago Federal Reserve national activity index rose in March, but still indicated below-trend growth. (Reporting by Lucia Mutikani; Additional reporting by Ann Saphir in Chicago; Editing by Jan Paschal )