The Labor Department said Thursday that initial claims for unemployment insurance dropped to a seasonally adjusted 545,000 from an upwardly revised 557,000 the previous week. Wall Street economists expected claims to rise by 5,000, according to Thomson Reuters.
The decline was the third in the past four weeks. The four-week average, which smooths out fluctuations, dropped 8,750 to 563,000. Despite the improvement, that's far above the 325,000 per week that is typical in a healthy economy.
"The message here is that the labor market's healing process is agonizingly slow," Joshua Shapiro, chief economist at MFR Inc., wrote in a note to clients.
Another government report provided mixed news on the housing market. The Commerce Department said construction of new homes and apartments rose 1.5 percent to an annual rate of 598,000 units last month, the highest level since November and 24.8 percent above the record low hit in April. Applications for building permits, a good forecaster of future activity, also rose.
Still, the volatile multifamily sector drove the gains. The larger single-family sector dipped 3 percent last month to an annual rate of 479,000 units, the first setback following five straight monthly increases.
While single-family housing starts are well above the historic lows hit late last year and early in 2009, the recent results most likely are a rebound "from unsustainably weak results ... reinforced by a temporary boost to demand" from the $8,000 first-time homebuyer tax credit that ends Dec. 1, Shapiro said.
"Gains from here on will probably be much more difficult to achieve," due to high unemployment, tight credit and a large number of new and existing homes already on the market, he said.
The number of people claiming jobless benefits for more than a week rose by 129,000 to a seasonally adjusted 6.2 million. The continuing claims data lags initial claims by one week.
When federal extended benefits are included, 9.01 million people received unemployment insurance in the week ending Aug. 29. That's down from 9.16 million the previous week. Congress has added up to 53 weeks of extended benefits on top of the 26 weeks provided by the states.
Thursday's report comes a day after the Federal Reserve said production by the nation's factories, mines and utilities increased for the second straight month in August, the latest sign the economy is recovering.
But the economy isn't improving fast enough to spur greater hiring. Fed Chairman Ben Bernanke on Tuesday said the recession is likely over, though he noted that the economy isn't likely to grow fast enough to lower unemployment anytime soon.
The jobless rate is widely expected to peak next year above 10 percent, up from its current 9.7 percent. Some analysts say that claims need to drop below 400,000 before the unemployment rate will start to decline.
More job cuts were announced this week. Drugmaker Eli Lilly & Co. said Monday that it will cut 5,500 jobs over the next two years, 14 percent of its work force, as it restructures the company into five business units.
Among the states, Washington had the largest increase in claims of 4,546, which it attributed to greater layoffs in the construction, public administration, and manufacturing industries. The next largest increases were in Pennsylvania, Massachusetts, North Carolina and Illinois. The state data lag initial claims by a week.
California had the largest drop in claims of 2,751. The next largest decreases were in New York, Wisconsin, Texas and New Jersey.
AP Economics Writer Martin Crutsinger contributed to this report.