WASHINGTON (Reuters) - The number of Americans lining up for new jobless benefits fell slightly last week but remained above levels posted earlier this year, suggesting improvement in the labor market is stalling.
Initial claims for state unemployment benefits dropped by 1,000 to 388,000, the Labor Department said on Thursday.
"This was a disappointing number and offers more evidence that the labor market continues to lose traction," said Joe Manimbo, an analyst at Western Union Business Solutions in Washington.
Economists polled by Reuters had expected new claims to fall to 375,000.
Still, a separate report offered fresh hopes of a pickup in the housing market, which has been a drag on wider economic growth since the 2007-2009 recession.
The National Association of Realtors said contracts to purchase previously owned U.S. homes rose 4.1 percent to a near two-year high in March.
U.S. stocks rose following the release of the home sales data, while concerns over the labor market pushed yields lower on U.S. government debt.
The report on jobless claims was the latest example of fizzling momentum in the labor market recovery.
Employers added 120,000 new jobs to their payrolls in March, the least since October, after averaging 246,000 jobs per month over the prior three months.
New claims for unemployment benefits fell sharply over the winter but the improvement has largely reversed over the last month.
The four-week moving average for new claims, a closely followed measure of labor market trends, rose 6,250 last week to 381,750, its highest since the week that ended January 7.
Many economists believe a mild winter boosted payrolls growth and lowered claims for jobless benefits. They had viewed recent stagnation as payback for those gains.
But the longer claims stay elevated, the more likely it is that an underlying deterioration in the labor market is occurring.
"It's certainly disturbing that we are not seeing these numbers heading down," said Beth Ann Bovino, an economist at Standard & Poor's Ratings Services in New York.
A Labor Department official said there was nothing unusual in the state-level data in the claims report.
Other reports have shown the economy losing a step at the close of the first quarter. New orders for long-lasting U.S. manufactured goods tumbled in March and industrial output was flat for the second straight month.
Federal Reserve Chairman Ben Bernanke on Wednesday said the U.S. central bank "would not hesitate" to launch another round of bond purchases to drive borrowing costs lower if it looked like the economy needed it. The unemployment rate fell to 8.2 percent in March although the Fed said that level was still elevated.
Thursday's report on claims showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 3,000 to 3.32 million in the week ended April 14.
A total of 6.68 million people were claiming unemployment benefits in the week that ended April 7, down 87,160 from the prior week.