Dec retail sales somber

WASHINGTON (Reuters) - Major retailers on Thursday reported largely disappointing sales for the critical December shopping season, while a separate report showed new claims for jobless benefits fell unexpectedly, somewhat easing concerns of a weakening job market.

In remarks prepared for delivery to a housing and finance group, Federal Reserve Chairman Ben Bernanke said the U.S. economy's prospects were worsening because of a weak housing sector and credit market turmoil and said the central bank was ready to act aggressively to bolster it.

"In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary," Bernanke said

The dollar extended losses and stocks climbed after Bernanke signaled further interest rate cuts, while Treasury debt prices rose briefly.

In their reports on the holiday shopping season, retailers said business was hurt by snowstorms, as well as deep discounts aimed at attracting shoppers.

"Consumers clearly tightened purse strings this holiday season, feeling the squeeze of macroeconomic pressures," Ken Perkins, president of Retail Metrics, a research firm, said in a research note.

"Traffic was sluggish throughout the holiday season. Combined November and December holiday sales rose just 1.7 percent, the worst since 2002," he said.

Expectations for December retail sales were quite low as consumers cut back on discretionary spending in the face of higher gasoline and food prices, resetting mortgages and general economic uncertainty.

JOBS UNCERTAINTY

The Labor Department reported on Thursday that the number of U.S. workers applying for unemployment aid fell by 15,000 last week.

Initial claims for state unemployment benefits fell to a seasonally adjusted 322,000 in the week ended January 5, from a slightly upwardly revised 337,000 the prior week.

The four-week moving average of new claims, which irons out volatility in the weekly figures, fell for the second straight week, to 341,000 from 344,000 the prior week.

A Labor Department analyst said there were no special factors behind the surprise decrease and noted that this time of year can be difficult to account for seasonal adjustments. "This is a real tough time of the year for us," he said.

Traditionally, there is a good bit of volatility during the period between Thanksgiving and the observance of civil rights leader Martin Luther King's birthday in mid-January.

The U.S. jobless rate rose to 5 percent last month from 4.7 percent in November, a government said last Friday, the largest monthly rise since October 2001, shortly after the September 11 attacks.

The December jobs report stirred fears the U.S. economy might be falling into a recession, if not already in one, and led financial markets to raise bets that the Fed would cut interest rates by a hefty half-percentage point at a meeting on January 29-30.

The number of people who remain on the benefit rolls after drawing an initial week of aid dropped by 52,000 to 2.70 million in the week ended December 29, the latest period the figures were available. But that number remained close to levels reached during 2005 in the aftermath of Hurricane Katrina.

"Perhaps more important given the sharp jump in unemployment in December to 5 percent is the continuing claims series," said Joseph Brusuelas, U.S. chief economist at IDEAglobal in New York, in a research note.

"A move above 3 million is consistent with past recessions and the market will continue to monitor this data closely, as the traditional seasonal volatility works its way out of the series," he said.

A separate report showed a 2.2 percent rise in wholesale sales during November, the biggest monthly gain since September 2005, while inventories rose 0.6 percent.

(Additional reporting by Martinne Geller and John Parry in New York and Lisa Lambert in Washington; Editing by Dan Grebler)