Jobless claims ease, but still at higher levels

Jobless claims are still more than 200,000 higher than a year ago. Initial claims for state unemployment insurance benefits fell 21,000, to a seasonally adjusted 554,000 in the week ended December 13 from an upwardly revised 575,000 the previous week, the Labor Department said.

State offices were closed for at least one day near the end of November because of the Thanksgiving holiday, distorting the holiday week and the following week's numbers.

"This provides further evidence that not only are we in a deep recession, it may be one of the worst recessions seen in the past 50 years," said Dana Saporta, an analyst at Dresdner Kleinwort in New York.

U.S. equity index futures traded slightly higher after the data, while government bond prices pared some gains.

Analysts polled by Reuters had forecast 558,000 new claims versus a previously reported 573,000 the week before.

Claims are likely to resume their upward trend as more companies lay-off workers to cope with the worse financial crisis since the Great Depression that has left the U.S. economy mired in recession since last December.

In an unprecedented move on Tuesday, the Federal Reserve cut its key overnight lending rate to a zero-0.25 percent range, a record low, from 1 percent. The step was aimed at arresting an economic downturn.

The four-week moving average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, rose to 543,750 from 541,000 the prior week, keeping the average at a 26-year high.

Continuing claims fell to 4.38 million in the week ended December 6 after scaling a 26-year high of 4.43 million the previous week.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)