msnbc.com news services
updated 11/4/2010 3:21:43 PM ET 2010-11-04T19:21:43

The number of people seeking jobless benefits jumped sharply last week, after two straight weeks of declines, showing the labor market remains under pressure.

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The increase undermines hopes that unemployment claims, after falling four times in the previous five weeks, were on a sustained downward trend. That would signal layoffs were slowing and hiring was picking up. Instead, claims remain stuck at an elevated level.

"Those looking for an imminent spurt of job creation are, for yet another week, likely to be disappointed," said Dan Greenhaus, chief economic strategist at Miller Tabak, in a note to clients.

Meanwhile, labor costs fell and productivity rebounded a bit, although the efficiency of U.S. workers is at a much weaker pace than last year in a sign that companies may have to step up hiring.

The Labor Department said Thursday initial claims for unemployment aid rose by 20,000 to a seasonally adjusted 457,000 for the week ending Oct. 30. Wall Street analysts polled by Thomson Reuters had expected a smaller rise.

The increase comes after claims fell in four of the previous five weeks. Those drops had brought claims to their lowest level since July and raised hopes the job market was improving.

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Instead, claims have risen back above the 450,000 level they have fluctuated around all year. They will need to drop below 425,000 to signal sustained job gains.

The emergency benefits program, extended several times by Congress, is set to expire at the end of this month. Many analysts doubt Congress will extend it again. That could cause as many as 1 million people a month to lose benefits, according to the National Employment Law Project, a nonprofit group.

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U.S. non-farm productivity rose faster than expected in the third quarter and unit labor costs dropped, according to a government report that still pointed to a sluggish recovery.

Productivity increased at an annual rate of 1.9 percent after shrinking at a 1.8 percent pace in the second quarter, the Labor Department said. The 1.9 percent rise in productivity was still well below the 3.5 percent increase turned in for all of 2009, the biggest advance in six years.

Analysts surveyed by Reuters had forecast productivity, a measure of hourly output per worker that is taken as an indicator of the economy's vitality or lack of it, rising at a 1.0 percent rate in the third quarter.

Unit labor costs, a gauge of potential inflation pressures closely watched by the Federal Reserve, fell at a 0.1 percent rate after rising a revised 1.3 percent in the second quarter. Economists had expected unit labor costs to rise at a 0.7 percent rate in the third quarter.

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The Fed announced on Wednesday it would inject an additional $600 billion into the economy through government bond purchases by the middle of next year to push interest rates further down and stimulate the sickly economy.

The economy's recovery from the longest and deepest downturn since the 1930s has suffered a setback, leaving unemployment uncomfortably high. The economy grew at a sluggish 2.0 percent annual pace in the third quarter, a touch faster than the 1.7 percent rate in the second quarter, but way below potential.

Total non-farm output grew at a 3.0 percent rate in the July-September period, the Labor Department said, accelerating from a 1.6 percent rate in the second quarter. Hours worked increased at a slower 1.1 percent rate after a 3.5 percent pace in the second quarter

The Associated Press and Reuters contributed to this report.

Video: Weekly Jobless Claims

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