Jobless Claims Surge, Retailers Mixed

By Andrea Hopkins

WASHINGTON (Reuters) - New claims for U.S. jobless pay surged unexpectedly last week to the highest level since late September, but analysts shrugged off the jump as a holiday blip and looked to Friday's payrolls report for a better look at the labor market.

The number of Americans filing first-time claims for state unemployment insurance aid rose 43,000 to 364,000 in the week ended Jan. 1, up from a revised 321,000 in the previous week, the Labor Department said.

It was the largest one-week gain in nearly three years and far surpassed Wall Street expectations for a rise to 331,000 from the originally reported 326,000 in the prior week.

A Labor Department analyst said the rise was partly due to difficulties with seasonal adjustments for the holiday, and economists said the data did not alter their outlook for healthy hiring in December.

In separate news, U.S. retailers delivered mixed sales results for December, the year's key shopping month, with upscale stores faring well but many others slashing prices, squeezing profits.

U.S. Treasury bond prices got a modest lift on the weaker-than-expected jobs claims report. The dollar shaved some gains immediately following the news but remained higher on the day, extending a broad week-long rally.

U.S. stocks traded higher as a slew of retailers reported holiday sales data, though the weak employment data caused some concern.

HOLIDAY BLIP

Analysts stressed the volatility of the jobless claims report, especially around the holidays.

"This week was the end of New Year's Eve and we always have trouble adjusting for holidays. This year Christmas was also on a weekend," said Anne Parker Mills, head of foreign exchange research at Brown Brothers Harriman in New York.

"If you look at the four-week moving average, the level remains consistent with comfortable gains in the jobs number. It does not do anything to change consensus expectations for a gain of 175,000 jobs tomorrow," Mills said, referring to the Labor Department's December employment report to be released on Friday.

The closely watched four-week moving average of claims, which smooths weekly volatility, climbed to 333,000 from 332,250 in the prior week.
The department's employment report is expected to show 175,000 jobs were created last month after November's 112,000 gain. The unemployment rate is expected to be unchanged at 5.4 percent.

In retail news, Wal-Mart Stores Inc. (WMT.N) , the world's biggest retailer, said sales at U.S stores open at least a year -- a key gauge known as same-store sales -- rose 3 percent, at the top of its outlook, with sales of food stronger than sales of general merchandise.

The gain compared to a 4.3 percent rise a year earlier as the pace of U.S. sales overall slowed from last year.

Wal-Mart had cut its outlook for December early in the season, with high energy prices and sluggish jobs growth crimping lower income earners' spending.

Costco Wholesale Corp. (COST.O) , the No. 1 warehouse club, posted better-than-expected U.S. same-store sales, up 8 percent on across-the-board gains, continuing a run of upbeat results.

But the losers were many and varied.

"This was not a good period for retailers or shoppers," said Kurt Barnard, president of industry forecaster Retail Consulting Group. "We saw a dearth of exciting, new items."

But analysts said the season, which represents about 23 percent of annual retail sales, would have been worse if retailers had not cut prices, triggering a late rush to stores, and without the growth in online and gift card sales.

Separately, the Transportation Services Index (TSI) rose 1.3 percent in October, the largest monthly gain since April, as both freight and passenger services climbed, according to the Transportation Department.