Weekly Jobless Claims Drop Proves to Be Short-Lived

Weekly applications for U.S. unemployment benefits jumped 46,000 last week to a seasonally adjusted 388,000, the highest in four months. The increase represents a rebound from the previous week's sharp drop. Both swings were largely due to technical factors.

Mark Ralston | AFP | Getty Images Unemployed Americans attend a National Career Fair

The Labor Department says the four-week average of applications, a less volatile measure, fell slightly to 365,500, a level consistent with modest hiring.

Last week, California reported a large drop in applications, pushing down the overall figure to the lowest since February 2008.

This week, it reported a significant increase as it processed applications delayed from the previous week. (Read More: Why Jobless Claims May Not Be as Good as Market Thinks.)

A department spokesman says the seasonally adjusted numbers "are being distorted ... by an issue of timing."

Many economists believe a reading below 400,000 points to an improving labor market. The four-week moving average of new claims, which smoothes out volatility and is considered a better measure of labor market trends, rose just 750 last week to 365,500.

"Improvement in the labor market will continue to be fitful and slow," said Joseph Trevisani, a market strategist at Worldwide Markets in Woodcliff Lake, N.J.

Applications are a proxy for layoffs. When they decline, it suggests hiring is improving.

The prior week's figure was revised up to show 3,000 more applications than previously reported to 342,000.

Some recent reports suggest the economy is picking up.

Retail sales grew in September at a healthy clip. And builders started construction on new homes and apartments last month at the fastest pace in more than four years. (Read More: Property Flippers Are Back as Housing’s New Middle Men.)

Still, the economy is not growing fast enough to generate much hiring. Growth slowed to a tepid annual rate of 1.3 percent in the April-June quarter, down from 2 percent in the previous quarter.

Most economists see growth staying at or below 2 percent in the second half of the year.