Home sales at 10-year low, jobless claims jump

By Alister Bull

WASHINGTON (Reuters) - Jobless claims jumped and the pace of existing home sales tumbled to a 10-year low as slowing growth hit hiring and a glut of unsold houses weighed on real estate, data released on Thursday showed.

The number of workers filing new claims for jobless benefits jumped 34,000 last week, the Labor Department said, in part reflecting seasonal volatility typical at this time of year, but also indicating that jobs were hard to find.

A separate report from the real estate industry said that home sales dropped 2.6 percent in June, dragging the annual sales pace to the lowest since early 1998.

The Dow Jones industrial average .DJI closed 2.4 percent lower as the data darkened hopes for the economy and a record $8.7 billion second quarter loss by Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) underlined the severe headwinds confronting manufacturers.

U.S. government bonds, which benefit from signs of economic weakness, extended gains. The dollar lost ground against the yen, but bounced against the euro <EUR=> after news in the euro zone cooled expectations of higher interest rates.

Sliding U.S. house prices and mounting losses from the subprime mortgage market sparked a credit crunch last year that has chilled growth and hiring, despite aggressive cuts in benchmark interest rates by the Federal Reserve, the U.S. central bank.

"The message from claims is that unemployment is still rising," said James O'Sullivan, economist at UBS Securities in Stamford, Connecticut.

Initial claims for state unemployment insurance benefits rose to a seasonally adjusted 406,000 in the week ended July 19, from a revised 372,000 the prior week, the U.S. Labor Department said. It was the highest reading since late March and above forecasts of 376,000 new claims.