By Lucia Mutikani
WASHINGTON (Reuters) - The number of Americans filing new claims for jobless benefits rose last week for a third straight week, but the underlying trend continued to point to solid improvement in the labour market.
Although the economy is recovering from a soft patch at the start of the year, other data on Thursday showing weak new home sales and manufacturing activity suggested that the rebound could lack the vigour seen after last year's first-quarter weather-induced slump.
Growth braked sharply early this year as the economy was slammed by harsh winter weather, weak global demand and a now-settled labour dispute at West Coast ports. Activity also was constrained by a strong dollar as well as lower energy prices, which have hurt profits for some companies.
Initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 295,000 for the week ended April 18, the Labor Department said.
Despite the increase, claims remained for a seventh consecutive week below the 300,000 threshold, a level associated with a strengthening labour market.
"Whatever hiccup that may have occurred in the labour market in late February, the claims data suggest it has passed and claims have reverted to showing a very low level of layoffs," said John Ryding, chief economist at RDQ Economics in New York.
U.S. stocks were trading marginally lower after the data, while prices for U.S. government debt also fell. The dollar dipped against a basket of currencies.
Last week's claims covered the period during which the government canvassed employers for April's non-farm payrolls report. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, increased 1,750 last week to 284,500.
The four-week average of claims fell 20,750 between the March and April survey periods, suggesting an acceleration in job growth.
Employment growth slowed sharply in March, with non-farm payrolls increasing by only 126,000, ending a 12-month stretch of gains above 200,000. But with the weakness mostly concentrated in the weather-sensitive leisure and construction sectors, economists downplayed the slowdown.
"The trend in claims ... continues to impress and runs counter to the disappointment we saw in the March payrolls report, suggesting it may be too early to draw conclusions about the strength of the labour market from that one report," said Derek Lindsey an analyst at BNP Paribas (PARIS:BNPP) in New York.
Federal Reserve officials have said they would like to see further improvements in the labour market before raising interest rates. The faltering economic growth at the start of the year has made a June rate hike less likely.
The U.S. central bank has kept its short-term interest rate near zero since December 2008.
In a separate report, the Commerce Department said new home sales declined 11.4 percent to a seasonally adjusted annual rate of 481,000 units.
The drop, however, which was the biggest since July 2013, followed three straight months of hefty gains, and February's sales pace was revised up to the highest level in seven years. New home sales account for 8.5 percent of the market.
The outlook for the housing market remains upbeat against the backdrop of a strengthening labour market and moves by the government to ease credit conditions for first-time buyers. Data on Wednesday showed that sales of previously owned homes hit an 18-month high in March.
In a third report, financial data firm Markit said factory activity slowed in early April, but remained in expansionary territory.