WASHINGTON (AP) - The number of people who applied for unemployment benefits last week rose by the most in a month, signaling growing weakness in the job market.
Applications rose by 9,000 to a seasonally adjusted 429,000 last week, the Labor Department said Thursday. It was the second increase in three weeks and the 11th straight week that applications have been above 400,000.
The four-week average for unemployment benefit applications, a less volatile measure, was unchanged at 426,250 last week.
Applications dipped below 400,000 in February and stayed under that threshold for seven of the following nine weeks. Applications fell as low as 375,000, a level that signals sustainable job growth. But applications surged in April to an eight-month high of 478,000 and have shown only modest improvement since that time.
Companies pulled back on hiring in the spring in the face of higher gas and food prices. That has cut into consumer spending on other discretionary items, such as furniture and appliances, which help boost economic growth.
Employers added only 54,000 net new jobs in May, much slower than the average gain of 220,000 per month in the previous three months. The unemployment rate rose to 9.1 percent from 9 percent in April.
The economy needs to generate at least 125,000 jobs per month just to keep up with population growth. And at least twice that many jobs are needed to bring down the unemployment rate.
The Federal Reserve acknowledged on Wednesday that the economy has slowed in recent months. Fed officials also said in a statement summing up their two-day meeting that "recent labor market indicators have been weaker than anticipated."
As a result, the Fed reduced its forecast for employment and growth this year. It projects that unemployment at the end of 2011 will be around 8.6 percent to 8.9 percent. That's more pessimistic than its forecast from two months ago, which had put the unemployment rate at 8.4 percent to 8.7 percent by year's end.
That pessimism is also seen in projections by private economists. According to an Associated Press Economy survey last week, the nation will add only about 1.9 million jobs this year and the unemployment rate will fall to only 8.7 percent at the end of the year.
The Labor Department reported that computer processing problems forced the agency to make estimates for five states and one territory last week. The states affected were Ohio, Mississippi, Oregon, New Hampshire, Washington state and the Virgin Islands. That means the national figure could be revised slightly when the actual data from those states is processed.
The number of people receiving unemployment benefits dropped by 1,000 to 3.7 million. But that doesn't include the millions of additional unemployed Americans receiving benefits under emergency benefit programs put in place during the recession.
All told, 7.5 million received benefits during the week ending June 4, that's up by 137,000 from the previous week.
More hiring is critical to boosting the economic growth. It leads to greater consumer spending, which accounts for 70 percent of total economic activity. Consumer spending slowed to a 2.2 percent growth rate in the first three months of this year. The weakness reflected the rise in gas prices.
The Fed on Wednesday left a key interest rate unchanged at near zero percent and repeated a pledge to keep rates exceptionally low for "an extended period."
Fed officials said in a statement that they think the main causes of the economy's slowdown, such as high gas prices and supply disruptions from Japan's disasters, are temporary. Once those problems subside, Fed officials said the economy should rebound.
But at a news conference after the statement was released, Federal Reserve Chairman Ben Bernanke acknowledged that some of the problems slowing the economy could persist into next year. He cited continued weakness in the financial sector and persistent problems in the housing market.
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