Weekly applications for unemployment aid declined by 2,000 to a seasonally adjusted 387,000, the Labor Department said. That's down from an upwardly revised 389,000.
A more telling sign of the trend in unemployment benefit applications is the four-week average, which smooths week-to-week fluctuations. That rose for by 3,500 to 386,250, the highest level since December.
"After a fairly substantial period of constantly lower jobless claims, a new, more unwelcome trend higher has taken hold," said Dan Greenhaus, chief economic strategist at BTIG LLC, in an email. "A meaningful pickup in monthly job additions looks unlikely."
Applications are a measure of the pace of layoffs. They have been edging up in recent weeks after falling steadily over the fall and winter. In the past six weeks, applications have increased nearly 5 per cent. When applications fall below 375,000, it generally suggests hiring is strong enough to reduce the unemployment rate.
Hiring slowed sharply in April and May, raising concerns about the strength of the recovery. Employers have added an average of only 73,000 jobs per month in April and May. That's much lower than the average of 226,000 added in the first three months of this year.
The number of people receiving unemployment benefits fell slightly. A total of 5.8 million people received benefits in the week ended June 2, the latest data available. That's about 1,000 fewer than the previous week.
The Federal Reserve acknowledged the sluggish hiring on Wednesday when it said it will extend a program intended to drive down long-term U.S. interest rates. The goal of the program is to encourage more borrowing and spending, which boosts growth and could lead to more job creation.
Fed Chairman Ben Bernanke said the Fed was prepared to take further steps, particularly if hiring doesn't pick up soon.
The Fed also sharply cut its forecast for growth this year. At best, it says the economy will grow no more than 2.4 per cent for the year. And the Fed warned that growth could be as low as 1.9 per cent — matching the dismal first-quarter annual pace.
The unemployment rate won't fall much further from its current level of 8.2 per cent, the Fed said. At best, it forecasts that it will drop to 8.0 per cent.
Faster job creation is crucial in order to accelerate growth. More jobs mean more income for consumers, which may lead to higher spending. Consumer spending fuels about 70 per cent of the economy.
But several recent economic reports have pointed to sluggish growth. Employers posted sharply fewer job openings in April compared to the previous month, the government said Tuesday.
With job growth weak, consumers have pulled back on spending. Retail sales have fallen for the past two months, although part of the weakness was due to a sharp decline in gas prices.
Businesses are also less confident about the economy's health. They are placing fewer orders at factories, which has slowed manufacturing output. A measure of companies' investment spending has dropped for two straight months.Suggest a correction