updated 5/18/2006 9:34:50 AM ET 2006-05-18T13:34:50

The number of new people signing up for jobless benefits rose sharply last week mainly due to the lingering effects of a partial government shutdown in Puerto Rico, which caused worker layoffs.

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The Labor Department reported Thursday that new applications filed for unemployment insurance shot up by a seasonally adjusted 42,000 to 367,000 for the week ending May 13. That was the highest level of claims since early October.

Last week’s number, however, was inflated by layoffs related to the shutdown, which has now been resolved, a department analyst said. If not for the flood of jobless claims filings from the shutdown, last week’s claims would have stood at a seasonally adjusted level of around 312,000 last week, the analysts estimated.

That would have been considerably closer to economist forecasts for claims to have come in at around 318,000.

The more stable four-week moving average of new claims, which smooths out week-to-week fluctuations, rose to 333,250 last week, an increase of 15,750 from the prior week.

The report also showed that the total number of people continuing to collect unemployment benefits went up by 8,000 to 2.389 million for the week ending May 6, the most recent period for which that information is available.

Although it was difficult to divine any fresh clues about the health of the overall labor market in Thursday’s jobless claims report, another important barometer, released in early May, showed job growth slowed in April.

Employers expanded payrolls by just 138,000 in April, the smallest growth since October. The unemployment rate held steady at 4.7 percent last month.

The Federal Reserve boosted interest rates last week for the 16th time in two years, an effort to keep inflation from getting out of control.

Fed policymakers left future rate decisions wide open, though, as they grapple with whether the economy is more likely to slow or if high energy prices are more likely to ignite worrisome inflation. If policymakers think slower growth is the more probable course, then a pause would be favored. If inflation is more likely, then another rate increase could be in store.

After a government report released Wednesday showed consumer prices bolting ahead in April, many economists said the odds are now increasing that the Fed will bump up rates again at its next meeting, June 28-29.

Some, however, still believe the Fed will take a pause in its two-year-old rate-raising campaign in June and leave rates alone. Those analysts predict slower economic growth will eventually ease inflation pressures.

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