WRAPUP 4-US jobless claims jump points to slowing recovery

* Initial jobless claims rise 43,000 to eight-month high

* Productivity slows, unit labor costs rebound

* Data dampens hopes for a reacceleration in growth
(Adds details, updates markets)

By Lucia Mutikani

WASHINGTON, May 5 (Reuters) - The number of Americans
filing for jobless aid rose to an eight-month high last week
and productivity growth slowed in the first quarter, clouding
the outlook for an economy that is struggling to gain speed.

While the surprise jump in initial claims for unemployment
benefits was blamed on factors ranging from spring break
layoffs to the introduction of an emergency benefits program,
economists said it corroborated reports this week indicating a
loss of momentum in job creation.

New claims for state jobless benefits rose 43,000 to
474,000, the highest since mid-August, the Labor Department
said on Thursday. Economists had expected claims to fall.

One factor that likely helped push claims up and that could
prove lingering were auto layoffs brought about by supply
disruptions from Japan's earthquake and tsunami.

A second report showed nonfarm productivity increased at a
1.6 percent annual rate in the first three months of the year,
braking from a 2.9 percent pace in the fourth quarter.

"We do not think that the entire rise in claims over the
last month can be explained by special factors alone," said
Harm Bandholz, chief U.S. economist at UniCredit Research in
New York. "It seems instead as if the improvement in the labor
market slowed a bit."
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Instant view on claims, productivity: [ID:nN05290682]
Graphic - jobless claims: r.reuters.com/zyd49r
Graphic - Same-store sales: r.reuters.com/suf49r
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The data, a day before the U.S. government's comprehensive
employment report for April, was the latest to suggest a
softening in the jobs market.

Other reports this week showed weaker employment growth in
the manufacturing and services sectors in April and a step back
in private hiring, suggesting Friday's closely watched data
could prove weaker than economists have been expecting.

An industry survey released on Thursday found hiring by
U.S. small businesses almost ground to a halt in April.
[ID:nN05293584]

ECONOMIC GROWTH SLOWS IN FIRST QUARTER

Boosting employment is critical to reinvigorating a
recovery weighed down by high food and energy pries. Growth
slowed to a 1.8 percent annual rate in the first quarter after
a 3.1 percent expansion in the final three months of 2010.

Economists anticipate a pick-up in growth but the
prediction could be in jeopardy if the stream of weak data
persists.

"The data is not consistent with the type of growth numbers
that are anticipated for the economy over the balance of the
year," said Steven Ricchiuto, chief economist at Mizuho
Securities in New York.

The claims data fell outside the survey period for the
April employment report, which is expected to show the jobless
rate holding at a two-year low of 8.8 percent.

A Reuters survey found economists expect that report to
show an increase of 186,000 in nonfarm payrolls, which rose by
216,000 in March -- the most in 10 months. However, that
forecast was made before this week's run of soft data.

SPECIAL FACTORS BLAMED

U.S. stocks fell for the fourth day in a row. They were
pressured by the claims report and a drop in energy shares as
oil prices fell. Government debt prices rose for a sixth
straight session. The dollar gained against the euro after the
European Central Bank offered few clues on the timing of future
interest rate increases.

Reports from retailers showed a late Easter boosted sales
of clothing and other holiday-related items in April, but
stores warned rising costs and a weak labor market would dampen
purchases over the next several months. [ID:nN05248438]

A Labor Department official said spring break layoffs in
New York added about 25,000 to the jobless benefit rolls last
week. He said the start of an emergency benefits program in
Oregon also helped lift the number of claims.

Many states in the Northeast allow for non-teaching staff
to file for unemployment benefits when schools close for spring
and summer breaks. The department tries to adjust its figures
to take into account these seasonal fluctuations but New York's
spring break occurred at an unusual time this year.

Tornadoes that struck parts of the country could also have
accounted for a small number of claims.

"We are hesitant to take too strong of a signal from the
recent increase in claims data and will look to upcoming
reports before suggesting that the upturn in claims is a sign
that the labor market has lost momentum," said Michael Gapen, a
senior economist at Barclays Capital in New York.

The slowdown in productivity in the first quarter reflected
the softening in growth, but also suggested businesses may soon
need to step up hiring.

"It's not unusual at this stage of the cycle to see
productivity slowing. We're seeing hiring, it's not very rapid,
but companies cannot squeeze more out of their workers
anymore," said Yelena Shulyatyeva, an economist at BNP Paribas
in New York.

The data showed a slight gain in wage-related price
pressures, which nevertheless were muted. Unit labor costs,
which gauge the cost of labor for any given unit of output,
rose at a 1 percent rate after dropping 1 percent in the fourth
quarter.
(Editing by Neil Stempleman and Andrew Hay)