NEW YORK (Reuters) - New claims for unemployment benefits fell more than expected last week, but a rise in the four-week moving average to a six-month high indicated the labor market recovery will remain painfully slow.
* Initial claims for state unemployment benefits fell 29,000 to a seasonally adjusted 409,000, the Labor Department said on Thursday, continuing to unwind the prior weeks' spike. * Economists polled by Reuters had forecast claims dropping to 420,000. The prior week's figure was revised up to 438,000 from the previously reported 434,000. * The four-week moving average of unemployment claims, a better measure of underlying trends, rose 1,250 to 439,000 - the highest level since mid-November.
"The weekly claims number was a relative improvement and should be supportive to the markets, generally. This improvement needs to continue, however, in order for economic activity to rebound from the current slowing being seen through recent data points.
"Energy and commodity prices have fallen recently due, in part, to signs of slowing, and any support for prices will have to start with improving employment."
MARK VITNER, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA:
"It is about as expected. There has been a lot of volatility in recent weeks and it looks like the prior week's number was bolstered by all the damage from the tornadoes in Alabama and also to some of the layoffs due to parts shortages at the auto manufacturers. When you take into account those temporary glitches the trend in jobless claims looks a little bit better, although 409,000 weekly jobless claims is still pretty high."
PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK
"The initial claims numbers are not bad. No special factors are operating in the new figure which would point to less of a deterioration than recent reports have shown. There's also a hint that much of the unemployment that was reflected in recent reports was temporary because the continuing claims count, which first went up sharply, now has fallen back. It has much further to fall to make this a good month, but the message is there is not a severe deterioration in the labor market. Next week's continuing claims number, which will refer to the payroll survey week, will be decisive."
"Fundamentally the picture hasn't deteriorated as much as that spike in claims several weeks ago. So don't expect a sharp down shift in jobs creation, but I do look for moderation. The payroll comparison is less in May than April. It's a relief that things are not getting worse. This doesn't derail the jobs recovery, but it might run a little slower."
STEVEN WOOD, CHIEF ECONOMIST, INSIGHT ECONOMICS, DANVILLE, CALIFORNIA:
"Continuing claims tumbled and their 2-year long declining trend is still in place. Finally, the number of people collecting benefits under the federal extended and emergency unemployment insurance programs were mixed but remain on their declining trend that has been in place since the middle of 2010. Recovery in the labor market has slowed in recent weeks."
HUGH JOHNSON, CHIEF INVESTMENT OFFICER, HUGH JOHNSON ADVISORS LLC, ALBANY, NEW YORK
"The claims number was a good number. It's better than expected...This is going to be good news for a market that already looked like it was going to get off to a positive start. So it's a good start, there are a lot of numbers that will be released today -- leading indicators, Philadelphia Fed, existing home sales. Each of which will be very important to add to the puzzle. Let's put this as a real good start to the day. The number jumps around from week to week, but nevertheless, it's good to start on a positive note."
"The 4-week average has been inching up and it is still moving higher, which suggests the improvement in employment is slowing. That is attributable to lots of factors -- the impact of Japan, the impact of weather, lots of factors that are non-recurring. It's a good number and it's obviously troubling to see the 4-week moving average moving move up but it can all be explained away by temporary factors."
PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK & CO, NEW YORK
"For the first time in six weeks, initial jobless claims were below expectations. It is though the sixth straight week above 400,000... The labor market is still adding jobs but the pace is still lackluster in the context of historical recoveries and especially after so many jobs were lost in the recession."
IAN LYNGEN, SENIOR GOVERNMENT BOND STRATEGIST, AT CRT CAPITAL, STAMFORD, CONNECTICUT:
"A solid improvement for NFP-survey week, however the 4-week moving average increased to 439k vs. 437.75k prior -- a recent high. With the Labor Dept confirming there are no special factors at play, it's a relatively clean read and accompanied with a drop in Continuing Claims to 3711k. Overall, an improved reading from claims, but still consistently above 400k."
"Treasuries were under pressure ahead of the release and sold off slightly in the wake of the data."
NEIL DUTTA, U.S. ECONOMIST, BANK OF AMERICA MERRILL LYNCH, NEW YORK
"Clearly what it shows is an ongoing healing in the labor market. The recent data have been skewed by special factors like the Easter holiday and supply chain issues coming out of Japan. That being said some of the increase in jobless claims have been organic due to the slowing in the economy.
"You have to look at the four-week moving average which is at 439,000. It was running well above what it has been recently. There is no reason that a slowing in the economy would not affect the labor market.
"The recent trend of 230,000 in payroll growth will likely slow to 175,000 to 200,000. That should suggest that the recovery is slowing but not derailed."
DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS:
"While the latest initial claims number provides some encouragement, the 4 week average of 439k is the highest since November 13 2010, and is up from 399.25k in April's payroll survey week, and 388.5k in March's. Only part of this rise in the 4 week average can be attributed to special factors that are now unwinding, assisting but not fully explaining the latest weekly decline.
"This is the 2nd straight fall in initial claims, following a 40k fall in the week to May 7. The state breakdown of the May 7 week (which is not seasonally adjusted) shows the fall was led by a 23k fall in New York, following a bounce due to a spring break that the seasonal adjustments failed to pick up. That was the main reason claims ended April at 478k, the highest level of the year to date. Last week's breakdown shows the largest rise came in Alabama, by 6k, a consequence of tornadoes in the state. Some of this week's fall is related to the reversal of that effect, with weather not cited as a special factor this week. The declines in claims in the last 2 weeks appear to go a little beyond what the unwinding of special factors in these 2 states imply. Interpretation of the data is tricky with the state data not seasonally adjusted, but we cannot attribute this week's decline solely to seasonal factors. Unadjusted claims fell by a sharper 40k."
MARKET REACTION: STOCKS: U.S. stock index futures add to gains. BONDS: U.S. bond prices extend losses. FOREX: The dollar extends gains versus the yen.