March 9 (Bloomberg) -- First-time claims for U.S. unemployment benefits unexpectedly rose last week while staying at a level that signals strength in the labor market, a government report showed.

Initial jobless claims rose by 8,000 to 303,000 in the week ended March 4, the Labor Department said in Washington. The figure compares with the weekly average of 326,200 in the past 12 months.

``Claims are still at a very low level,'' said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``The labor market remains definitely on a trajectory towards further tightening.''

Companies such as office-supply retailer Staples Inc. are hiring new workers as they expand, boosting consumer spending and economic growth. The economy in February probably generated the most jobs in three months, economists said before a government report on hiring due tomorrow.

Jobless claims were expected to fall to 290,000 from a previously reported 294,000, according to the median forecast of 40 economists surveyed by Bloomberg News. Estimates ranged from 275,000 to 310,000 new claims.

A Labor Department spokesman said part of the increase in claims may have been caused by a holiday in the prior week, which delayed some filings until the week ended March 4. Seasonal adjustments to the data may not have fully accounted for the effect of the Feb. 20 President's Day holiday, he said.

The U.S. trade deficit widened to a record $68.5 billion in January, reflecting higher oil prices and strong demand for imported goods stoked by economic growth, a separate report from the Commerce Department showed today.

Productivity

Weekly jobless claims, which reflect firings, tend to fall as monthly non-farm payrolls, which tally hiring, grow. Most economists say jobless claims of fewer than 300,000 signal payroll growth of 200,000 or more.

``We're in a situation where we have tight labor markets,'' Edward Lazear, chairman of the White House Council of Economic Advisers, told reporters today.

Payrolls probably increased 210,000 in February, up from a gain of 193,000 in January, according to a Bloomberg survey of economists. The jobless rate probably stayed at a four-year low of 4.7 percent. The Labor Department report is due at 8:30 a.m. tomorrow.

The economy added almost 2 million jobs in 2005, the second-best year for job creation since 1999. Payroll growth last year averaged 165,000 a month.

The four-week average of initial jobless claims, a less volatile measure than the weekly claims figure, rose to 293,500 from 287,250 the prior week, today's report showed.

Federal Reserve

Continuing claims rose to 2.506 million in the week ended Feb. 25 from 2.477 million. The four-week average fell to 2.494 million, the lowest since February 2001, from 2.505 million. The figures are reported with a one-week lag.

The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, was unchanged at 1.9 percent in the week ended Feb. 25.

Filings fell in 37 states and territories and rose in 16.

Labor productivity fell 0.5 percent last quarter, the first decline in almost five years, the Labor Department said March 7. As productivity growth slows, companies are more prone to boost hiring to increase output.

A tightening labor market, along with factories that are running closer to full capacity, may encourage the Federal Reserve to extend a series of 14 consecutive interest-rate increases.

The Fed last raised rates on Jan. 31, by a quarter point to 4.5 percent, and it said ``some further policy firming may be needed'' to ensure the economy can grow without stoking inflation.

Office Supplies

More economists are betting Fed policy makers will raise interest rates at least three more times this year. Sixteen economists in a Bloomberg News survey forecast the central bank will boost its target rate for overnight bank lending to 5.25 percent or higher by the end of the year. Of the 16, half raised their forecast since the February survey.

Job growth is helping fuel the consumer spending that's powering a rebound in economic growth this quarter. The economy will grow at a 4.7 percent annual rate from January through March, the strongest in more than two years, according to the median forecast in a Bloomberg survey of economists.

Staples, the world's largest office-supply retailer, is adding about 100 news stores a year as demand grows.

``We are seeing a pretty slow, steady growth in the economy in the last year or two that bodes very well for people going back to work and creating jobs,'' Ronald Sargent, chief executive officer of Staples, said in an interview on Feb 28.

``When you put people back to work, the thing we like about it best is they buy office supplies,'' Sargent said.

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

Last Updated: March 9, 2006 15:27 EST