Jobless claims fall but improvement seen as only temporary

WASHINGTON -- The number of newly laid off workers filing claims for unemployment benefits fell last week, but the larger-than-expected drop was seen as only a temporary improvement.

The Labor Department reported Thursday that the number of jobless claims dropped by 9,000 last week to a total of 349,000.

While that was bigger than the decline that had been expected, analysts noted that claims offices in California, the largest state, were closed for one day last week for a state holiday, giving laid off workers one less day to file claims..

The four-week average for claims, which gives a better picture of labor market trends, rose to 360,500, which was the highest level since claims spiked in October 2005 in the aftermath of Hurricane Katrina.

Analysts said the rise in the four-week average was depicting a labor market that is coming under increasing strains because of the slowing economy.

The Federal Reserve released a revised economic forecast on Wednesday that slashed growth prospects for this year but still maintained that the country could avoid a recession.

However, many private economist believe the country has already entered a downturn that began this quarter and will last through the spring. They are forecasting that the overall economy, which skidded to growth at a barely discernible annual rate of 0.6 percent in the final three months of last year, will turn negative in the first and second quarter this year. The classic definition of a recession is two consecutive quarters of negative economic growth.