By Lucia Mutikani
WASHINGTON (Reuters) - The number of Americans signing up for jobless benefits fell only slightly last week, doing little to calm growing fears of a pullback in the U.S. economy's recovery.
Initial claims for state jobless benefits slipped 6,000 to 422,000, the Labor Department said on Thursday, which was higher than the 415,000 claims expected by economists.
The disappointing drop fits in with other data on consumer spending and manufacturing indicating the economy has taken a decisively weak tone as the Federal Reserve prepares to wrap up its $600 billion government bond-buying program.
While independent economists and officials at the U.S. central bank continue to view the soft patch as transitory, concerns of a deeper, protracted slowdown grow.
"The question is whether the slowdown is temporary or something that is much longer," said Prajakta Bhide a research analyst at Roubini Global Economics in New York. "It's hard to say. A lot depends on what happens to consumption in the third quarter."
Initial claims have now been perched above the 400,000 mark for eight weeks in a row. Analysts normally associate that level with a stable labor market.
The report falls outside the survey period for the government's closely watched non-farm payrolls data for May to be released on Friday. Employers likely added 150,000 jobs, according to a Reuters survey, after increasing payrolls by 244,000 in April.
Much of the slowdown in growth has been blamed on high commodity prices, bad weather and supply chain disruptions from the March earthquake in Japan, which are all seen as transitory factors.
High food and gasoline prices cut into sales at major U.S. chain stores in May, with retailers such as Target Corp, Gap Inc and J.C. Penney Co Inc reporting sales below analysts' expectations.
Overall, sales at stores open at least a year rose 4.9 percent in May at the retailers tracked by Thomson Reuters data, below the 5.4 percent increase that Wall Street expected.
Stocks on Wall Street fell after the data, although they trimmed some losses on a report of a new plan to help Greece.
In contrast, prices for U.S. government bonds, which rose sharply on Wednesday as economic concerns grew, gave back some of their gains. The yield on the benchmark 10-year note held above 3 percent after falling below that level, which can signify economic nervousness.
Republican Mitt Romney on Thursday was due to kick off his second White House bid with a hard-hitting economic message charging that "Barack Obama has failed America.
LABOR COSTS MUTED
Economist on Wednesday had scrambled to cut their forecasts for Friday's payrolls report after ADP, a payroll service company, reported private employers added only 38,000 jobs last month, the smallest number since September.
While ADP has a mixed record at predicting non-farm payrolls, the data raised the prospect Friday's figures could come in below consensus.
A second report on Thursday from the Labor Department offered some hope for the labor market. Productivity grew at a 1.8 percent annual rate in the first quarter, up from the previously reported 1.6 percent pace.
Productivity during the period was still slower than the 2.9 percent pace set in the fourth quarter, suggesting employers might have to ramp up hiring soon to meet demand.
"We expect that over the next year the growth in productivity will slow even more, as businesses have reached the limits of how much more they can squeeze out of their existing work force," said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.
"This is good news for employment growth, which is likely to continue over the course of the next few quarters, albeit at a moderate pace."
The report also showed wage growth remained muted, with unit labor costs -- a measure of how much it costs for the labor needed for any given amount output -- rising at a downwardly revised 0.7 percent rate.
The economy's slowing pace was underscored by a report from the Commerce Department showing new orders received by U.S. factories fell 1.2 percent in April after rising 3.8 percent in March.
Although the recovery might be faltering, the bar is very high for an extension of the Fed's asset-buying program and there is little or no political will for more fiscal stimulus with a ballooning budget deficit and high headline inflation.
The economy, in particular the unemployment rate, will shape the 2012 presidential race. The jobless rate stood at 9 percent in April.
(Additional reporting by Glenn Somerville; Editing by Kenneth Barry)
