Jobless claims increased sharply last week

WASHINGTON (Reuters) - The number of workers filing new claims for jobless benefits rose by a more-than-expected 62,000 last week, government data on Thursday showed, as a year-long recession continued to chill the labor market.

Initial claims for state unemployment insurance benefits increased to a seasonally adjusted 589,000 in the week ended January 17 from a revised 527,000 the prior week, the Labor Department said.

It was the highest level of initial claims since a matching reading in the week of December 20. The last time claims were higher was in 1982, when they notched a weekly rise of 612,000. Analysts polled by Reuters had forecast 540,000 new claims versus a previously reported count of 524,000 the week before.

A Labor Department official said administrative delays in reporting claims during the year-end holiday season by some states may have contributed to the large increase in claims.

The large volume of new jobless claims as companies lay off workers has strained the capacity of some states' employment centers.

The four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, was unchanged at 519,250.

This measure has risen steadily as the U.S. housing slump roiled financial markets and spread to the wider economy, forcing lay-offs as firms slash costs to offset weaker income.

The number of people remaining on jobless insurance after drawing an initial week of aid increased 97,000 to a more-than-forecast 4.607 million in the week ended January 10, the most recent week for which numbers are available. Analysts estimated so-called continued claims would be 4.55 million.

(Reporting by Alister Bull; editing by Neil Stempleman)