Ahead of the Bell: Jobless claims

Government data are expected to show that new jobless claims dropped slightly last week, while the number of people continuing to receive unemployment benefits rose.

Economists expect the number of initial unemployment insurance claims, which reflects the level of layoffs, to slowly decline over the coming months as the economy bottoms out.

Still, jobs are likely to remain scarce and the nation's unemployment rate, currently at 9.4 percent, is expected to top 10 percent by the end of this year.

The Labor Department's tally of new jobless claims is forecast to drop by 8,000 to a seasonally adjusted 600,000, according to a survey of Wall Street economists by Thomson Reuters.

The number of people claiming unemployment insurance for more than a week, meanwhile, is expected to increase by 13,000 to a seasonally adjusted 6.7 million. Continuing claims dropped by about 150,000, or 2.2 percent last week, the first decline since early January.

Economists differ on whether that drop reflected an increase in the number of recipients running out of benefits or more hiring.

The report is scheduled to be released Thursday at 8:30 a.m. EDT.

Economists are closely watching the level of first-time claims for signs the economy will recover by the July-September quarter, as many predict.

The four-week average of initial claims, which smooths out fluctuations, fell to about 616,000 last week, down more than 40,000 from its height in early April. Goldman Sachs economists have said that claims typically peak about two months before a recession ends.

Still, claims remain elevated. A year ago they stood at 390,000.

The Federal Reserve said Wednesday that the recession is easing, though the economy will remain weak enough to keep inflation in check. Fed Chairman Ben Bernanke has said the economy will begin to recover by the end of this year.

The economy shrank at a 5.7 percent annual pace in the first quarter after a 6.3 percent drop in the fourth quarter of last year, the worst six-month decline in 50 years. Many analysts expect the decline to slow to about 2 percent in the April-June quarter, with the economy growing slightly in the third quarter.

Consumers and businesses have cut back on spending in response to the bursting of the housing bubble and the financial crisis, sending the economy into the longest recession since World War II.

Companies have cut a net total of 6 million jobs since the downturn began in an effort to reduce costs.

Still, job cuts are slowing. Employers eliminated 345,000 positions in May, about half the monthly average of jobs lost in the first quarter.

Troubles in the automotive sector could cause unexpected fluctuations in the claims. General Motors Corp. filed for bankruptcy protection June 1, joining Chrysler LLC, which filed April 30.

Companies are still shedding jobs. Monsanto Co., the world's biggest seed maker, said Wednesday that it will lay off about 900 workers, or about 4 percent of its work force, as third-quarter profit fell 14 percent.