* New claims for jobless benefits rise 19,000
* Four-week average of claims increases 5,250
* Continuing jobless claims fall 34,000
* July same-store sales up 2.9 pct, missing forecasts
(Adds Obama comments on the economy, updates markets)
By Lucia Mutikani
WASHINGTON, Aug 5 New U.S. claims for
unemployment benefits unexpectedly rose last week to the
highest level since early April, highlighting a weak labor
market and the fragile economic recovery.
Weekly claims data are often volatile and the figures
released on Thursday by the Labor Department have little
bearing on the government's closely watched monthly employment
report, due on Friday, as they fall outside the survey period.
Still, they are indicative of a labor market that is
struggling to gain momentum, putting a strain on the broader
economy's recovery from its longest and deepest downturn since
the Great Depression.
"While these numbers are volatile, we haven't really made
progress in the labor market and that's kind of troubling when
you think about the broader economic recovery," said Andrew
Gledhill, an economist at Moody's Economy.com in West Chester,
"For the recovery to turn into a self-sustaining expansion,
we need people to have wage income coming in and until that
happens, we are still in a tenuous position."
Initial claims for state unemployment benefits rose 19,000
to a seasonally adjusted 479,000, the Labor Department said.
That compared to market expectations for a drop to 455,000.
The surprise rise in jobless claims and below forecast
sales from domestic retailers pulled down U.S. stock indexes.
Prices for safe-haven U.S. government bonds rose, while the
dollar fell against the Japanese yen.
The government, according to a Reuters poll, is expected
to report on Friday that nonfarm payrolls fell 65,000 last
month after declining 125,000 in June as temporary workers
hired to conduct the decennial census were let go.
Private-sector payrolls are seen rising a modest 90,000 and
the unemployment rate is expected to climb to 9.6 percent from
9.5 percent in June.
THE ECONOMY IS A CAMPAIGN ISSUE
This will be unwelcome news for President Barack Obama,
whose popularity has tumbled amid growing unhappiness over the
health of the economy, which is the top campaign issue for the
November mid-term elections.
Obama on Thursday defended his policies and said the
economy still needed more time to heal.
"We've gone through a very, very difficult time. Our
economy is not yet where it needs to be," Obama told workers at
a Ford assembly plant in Chicago. "It's going to take more time
to heal from all the damage that was done. We are headed in the
The sluggish pace of economic growth threatens to keep
unemployment high for months, posing trouble for Democrats
hoping to retain their congressional majorities.
Growth slowed to a 2.4 percent annual rate in the second
quarter after expanding at a 3.7 percent pace in the first
three months of this year.
After falling rapidly in 2009, jobless claims have stalled
this year and are anchored above the 400,000 to 450,000 range
that analysts say is normally associated with sustainable jobs
"The rise in initial claims is a disturbing sign that
hiring remains depressed," wrote economists at Goldman Sachs.
The four-week average of new jobless claims, considered a
better measure of underlying labor market trends, rose 5,250 to
Stubbornly high unemployment is causing households to
become more frugal, forcing retailers to slash prices in a bid
to attract shoppers.
Twenty-eight retailers tracked by Thomson Reuters reported
a 2.9 percent rise in July sales at stores open at least one
year, missing Wall Street forecasts of 3.1 percent. Of those,
17 reported lower-than-expected sales, while nine beat
While the number of people still receiving unemployment
benefits after an initial week of aid fell to 4.54 million in
the week ended July 24, it was likely a reflection of people
dropping off benefits rolls rather than finding jobs.
The number of people on emergency benefits increased to
3.31 million in the week ended July 17. Congress restored aid
to about 2.5 million unemployed Americans, whose benefits had
lapsed in May. The benefits, which were extended until
November, were renewed retroactively to June 2.
"We are likely to see some pick up in the number of
extended and emergency claims in the short term, however, there
are still large numbers of people who are reaching the maximum
99 weeks of benefits," said Yelena Shulyatyeva, an economist at
BNP Paribas in New York.
Graphic on jobless claims: link.reuters.com/nej53n
Graphic on continuing claims: link.reuters.com/wyg53n
Grapic on retailer sales: link.reuters.com/nun53n
(Additional reporting by Alister Bull; Editing by Neil