Jobless claims a touch lower than expected

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless benefits fell by 10,000 last week, government data on Thursday showed, but remained at elevated levels indicating a weak labor market.

Initial claims for state unemployment insurance benefits declined to a seasonally adjusted 425,000 in the week ended Aug 23 from a revised 435,000 the prior week, the Labor Department said. It was the lowest reading since the week of July 19.

Analysts polled by Reuters had forecast 428,000 new claims versus a previously reported count of 432,000 the prior week. A Labor Department official said there were no special factors influencing the latest data.

The official said the indirect impact of a federal program to extend unemployment benefits, which had been blamed for boosting claims numbers in recent weeks, had steadily faded from the weekly readings. However, the official noted it might still be a factor in the so-called continued claims.

States, in the course of contacting people they thought were eligible for the extension, discovered that many more than anticipated were in fact eligible to file a normal initial claim.

The number of continued claims -- people remaining on the benefits roll after drawing an initial week of aid -- rose 64,000 to 3.423 million in the week ended Aug 16, the most recent week for which data is available. It was the highest reading since November 2003.

Analysts estimated continued claims would be 3.40 million. It was the 18th straight week that claims were above 3 million, in a sign that the slowing economy is making it harder for U.S. workers to find jobs.

The four-week average of new jobless claims, another closely watched gauge of underlying labor trends because it irons out week-to-week volatility, declined to 440,250 from 446,250 the week before.

(Reporting by Alister Bull; Editing by Chizu Nomiyama)