The department said Hurricanes Ike and Gustav were responsible for adding about 20,000 claims on a seasonally adjusted basis. That's down from approximately 45,000 the previous week.
The four-week average, which smooths out fluctuations, rose to 482,500, the highest since October 2001.
The number of Americans continuing to claim unemployment benefits rose to 3.66 million, above analysts' estimates of 3.6 million. That's the highest total in more than five years.
The housing slump and resulting credit crisis has hit the economy hard, causing consumers to cut spending and businesses to eliminate jobs.
In response to what has become a global credit crisis, the Federal Reserve and six other central banks on Wednesday announced a coordinated interest rate cut. The Fed reduced its target interest rate to 1.5 percent from 2 percent.
The Fed's cut means borrowing money becomes cheaper. Home equity loans, credit cards and other floating-rate loans all fluctuate depending on what the Fed does.
Jobless claims have come in above 400,000, a level economists consider a sign of recession, for 12 straight weeks. Claims stood at 316,000 a year ago.
The Labor Department said in a separate report last week that the economy shed jobs at its fastest pace in five years in September.
Employers cut 159,000 jobs last month, the ninth straight month of reductions. Companies have eliminated 760,000 jobs so far this year.
The unemployment rate remained at 6.1 percent in September, up from 5.7 percent in July and 4.7 percent a year ago.
The financial crisis will likely cause greater job cuts in the coming months as several large, troubled banks have been bought by competitors and layoffs are likely.
Several companies announced job cuts in the past week, including eBay Inc., Kraft Foods Inc. and MetLife Inc.