WRAPUP 2-U.S. jobless claims signal high unemployment rate

* Weekly jobless claims fall 4,000

* Continuing claims increase unexpectedly

* Import prices rise on energy, ex-petroleum up modestly
(Recasts with details, updates markets, adds byline)

By Lucia Mutikani

WASHINGTON, May 13 (BestGrowthStock) – The number of U.S. workers
filing for jobless benefits fell only slightly last week,
suggesting the unemployment rate will remain elevated even as
recovery in the labor market becomes entrenched.

Initial claims for state unemployment aid slipped 4,000 to
444,000 in the week to May 8, the Labor Department said on
Thursday, maintaining this year’s very modest downward trend
even as other job market indicators show major improvement.

Economists said the puzzling stickiness in claims, which
they had expected to dip to 440,000, underscored the challenges
the labor market confronts as it heals from the severe beating
it took during the worst recession since the 1930s.

“The labor market is clearly improving, but it has a long,
long way to go before it gets to any semblance of normalcy,”
said Joseph LaVorgna, chief U.S. economist at Deutsche Bank
Securities in New York.

U.S. stocks (Read more about the stock market today. ) slipped (.SPX: ) on the claims data, while prices
for long-dated government bonds (US30YT=RR: ) rallied. The U.S.
dollar rose to a one week high against the euro (EUR=: ).

In a second report, the department said import prices
increased 0.9 percent last month on higher petroleum costs
after rising 0.5 percent in March. However, excluding the
volatile petroleum category, prices were up only 0.3 percent,
suggesting little inflationary pressure.

“In spite of higher commodity costs, prices for imported
finished goods appear sluggish, suggesting firms’ pricing power
remains limited,” said Anna Piretti, an economist at BNP
Paribas in New York.

Although initial jobless claims are falling only slowly,
other measures of the labor market — including the
government’s closely watched monthly employment count —
suggest job growth is gaining steam as businesses become more
confident of the strength of the economic recovery.

Data released last Friday showed payrolls grew by 290,000
in April, the biggest gain in four years, but the unemployment
rate climbed to 9.9 percent from 9.7 percent in March.

The improving labor market tone helped retailer Kohl’s Corp
(KSS.N: ) post an 11 percent increase in net sales in the second
quarter and the group’s chief executive noted consumers were
getting a little more confident. For more see [ID:nN13258880].

SLOW IMPROVEMENT

The economy has grown for three straight quarters and while
employment has risen for four months in a row some economists
worry that the slow improvement in claims, if sustained, could
signal slower job growth ahead.

“It’s a little bit troubling, it gives us some pause that
perhaps we won’t see jobs (growth) of the same magnitude (as in
April) going forward,” said Andrew Gledhill, an economist at
Moody’s Economy.com in West Chester, Pennsylvania.

“In the past recessions, when claims have been at these
levels, we have not seen job gains of that magnitude.”

Though claims continue to grind lower, the number of people
still receiving jobless benefits after an initial week of aid
unexpectedly rose 12,000 to 4.63 million in the week ended May
1, the department said.

With unemployment still high and inflation pressures muted,
the Federal Reserve — the U.S. central bank — should be able
to keep to its promise of ultra-low interest rates for an
extended period, according to analysts.

Fed Vice Chairman Donald Kohn said on Thursday that the
Fed’s massive addition of reserves to the banking system,
undertaken to combat the financial crisis, was unlikely to
prove inflationary. [ID:nN13269195]

The tame inflation outlook was underscored by the mild rise
in nonpetroleum import prices, which were up 3.3 percent in the
12 months through April.

Analysts generally expect U.S. dollar strength and excess
capacity in the global economy to keep a lid on prices of
imported merchandise, excluding petroleum.

The department also said U.S. export prices rose 1.2
percent in April, building on the prior month’s 0.7 percent
advance. In the 12 months through April, export prices
increased 5.7 percent, the largest gain since July 2008.

Separately, in another positive sign for the economy,
lenders initiated far fewer new actions against struggling U.S.
homeowners last month, RealtyTrac said on Thursday.

April foreclosure filings fell 9 percent from March and 2
percent from a year ago, the first year-over-year drop since
RealtyTrac started tracking annual foreclosure rates in January
2006.

However, banks took control of a record 92,432 properties
in April, up 1 percent from a month earlier and 45 percent from
a year ago.

The housing market remains fragile but is getting support
from low borrowing costs. U.S mortgage rates dropped below 5
percent in the week ended May 13, the lowest level in five
months. [ID:nN13104076]

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U.S. jobless claims graphic: http://r.reuters.com/kyz83k

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Stock Market Report

(Additional reporting by Lynn Adler and Phil Wahba in New York
and Louise Egan in Ottawa; Editing by James Dalgleish)

WRAPUP 2-U.S. jobless claims signal high unemployment rate