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Jobless claims jump, home starts decline

More work ahead? U.S. builders broke ground on

More work ahead? U.S. builders broke ground on far fewer homes in April, but applications for new construction reached a five-year peak, the U.S. Commerce Department reported. This project is in Dublin, Calif. (May 14, 2013) Photo Credit: Bloomberg News

The U.S. economy showed worrisome signs as jobless claims rose sharply last week while groundbreaking at home construction sites tumbled in April and a gauge of underlying inflation pointed to weak demand.

The data released Thursday could fuel fears over the impact of a government austerity drive that began in January, and could raise pressure on the Federal Reserve to keep its money printing press running on overdrive as the central bank buys bonds to support the economy.

The number of Americans filing new claims for unemployment benefits climbed last week at the fastest pace in six months, the Labor Department said Thursday. Initial claims for state unemployment benefits jumped by 32,000 to 360,000. That was the biggest jump since November and confounded analysts' expectations for a more modest increase.

"I think there's plenty of slack in the labor market," said Tanweer Akram, an economist with ING U.S. Investment Management in Atlanta.

A Labor Department analyst said there were no signs furloughs for government employees played a significant role in last week's increase in claims.

The U.S. economy has shown signs that growth slowed late in the first quarter and in April as Washington's push to trim the budget deficit weighed on consumers and businesses. Social Security taxes were hiked in January, and the federal government initiated sweeping budget cuts in March.

A separate report showed groundbreaking for new U.S. homes plummeted more than expected in April.

The Commerce Department said starts at building sites for homes fell 16.5 percent in April to an 853,000-unit annual rate. Still, permits to build new homes increased, a reassuring reminder that the housing sector could still contribute to the economic recovery. Housing has been boosted by interest rates kept low by the Fed.

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