updated 5/27/2010 9:31:35 AM ET 2010-05-27T13:31:35

The number of newly laid off workers filing claims for unemployment benefits dropped last week but the level still remained higher than expected, indicating only modest improvements in the job market.

Major Market Indices

Applications for unemployment benefits fell by 14,000 to 460,000 last week, the Labor Department reported Thursday. Analysts had expected the level would fall further to 455,000.

Economists say they will feel confident about sustainable job creation once weekly first-time claims dip below 425,000.

The latest decline came after claims had risen by a revised 28,000 in the previous week, the largest gain in three months.

The latest level of claims is slightly higher than it was at the start of the year, underscoring that the nation's workers are still facing tough times even though the overall economy is growing again after enduring the worst recession since the 1930s.

In a separate report, the Commerce Department said Thursday that the overall economy, as measured by the gross domestic product, grew at an annual rate of 3 percent in the first three months of the year, slightly slower than the 3.2 percent initially estimated.

Even though the economy has been growing since last summer, the pace of growth has not been fast enough to make much of a dent in high unemployment.

October high
The jobless rate hit a high of 10.1 percent last October. While it fell to 9.7 percent for three months, it rose again to 9.9 percent in April as disappointed workers began returning to the labor market to search for jobs.

Jobless numbers at that level pose a risk to the recovery because they depress consumer spending, which accounts for 70 percent of total economic activity.

The four-week average for new jobless claims edged up to 456,500 last week.

The government said the number of people receiving benefits fell by 49,000 to 4.64 million for the week ending May 15.

However, that figure does not include unemployed workers who have exhausted their regular 26 weeks of benefits. An additional 5.3 million workers are receiving extended benefits for the week ending May 8.

For the week ending May 15, a total of 29 states and territories saw an increase in applications for unemployment benefits while 24 saw a decline.

The states with the largest increases were Tennessee, up 3,041, because of higher layoffs in trade, service, clothing and fabricated metals industries; Missouri, up 2,369, reflecting higher layoffs in construction and service industries, and Mississippi, up 1,697, an increase attributed to higher layoffs in service industries.

The states with the biggest declines were California, down 2,161; Michigan, down 2,133, because of fewer layoffs in the auto industry, and Washington, down 1,968.

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