July 17 (Bloomberg) -- The number of Americans filing first-time claims for unemployment benefits rose last week, reflecting a weakening labor market.

Initial jobless claims gained 18,000 to 366,000 in the week ended July 12, the Labor Department said today in Washington. Total benefit rolls declined to 3.122 million in the week ended July 5 from a 4 1/2-year high the week before.

The biggest U.S. housing recession in a generation, tightening credit and slowing consumer spending are inhibiting economic growth. A softening labor market means consumer spending may retrench, threatening to extend the slump.

``The labor market remains soft and we're going to see the unemployment rate move higher,'' said Gus Faucher, director of macroeconomics at Moody's Economy.com in West Chester, Pennsylvania. ``With the way the labor market is going, we're still likely to see claims move up. Consumers are concerned.''

Another government report showed U.S. housing starts unexpectedly surged in June because of a change in New York City building codes that encouraged builders to get an early start on multifamily projects. They overshadowed a drop in construction of single-family homes.

Housing Starts

Housing starts rose 9.1 percent to a 1.066 million pace from a revised 977,000 rate in May, the Commerce Department said today in Washington. Excluding a jump in construction of multifamily units in the Northeast, starts would have dropped 4 percent. Work began on single-family homes at the slowest pace in 17 years.

Economists had forecast jobless claims would rise to 380,000, according to the median of 41 projections in a Bloomberg News survey. Estimates ranged from 350,000 to 414,000.

Jobless claims figures can be difficult to interpret in July, the month automakers temporarily reduce staff to upgrade factories in preparation for new car models. Affected auto workers who are not eligible for vacation pay can apply for unemployment benefits.

The four-week moving average for initial claims, a less volatile measure of the labor market, decreased to 376,500 from 381,000.

Eligibility Rate

The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, fell to 2.3 percent from 2.4 percent. Twenty-eight states and territories reported an increase in new claims, while 25 had a decrease. These data are reported with a one-week lag.

Weekly claims have averaged 362,400 so far this year, compared with an average of 321,000 in 2007, when the economy generated 91,000 new jobs each month on average.

The U.S. lost 62,000 jobs in June, when the unemployment rate held at 5.5 percent, the government said on July 3. It was the sixth straight month of shrinking payrolls that have totaled 438,000 job losses so far this year. The next jobs report is due Aug. 1.

The Labor Department figures on unemployment claims so far aren't matching the losses seen in previous economic downturns. During the last recession, in 2001, about 415,000 workers on average filed jobless claims each week.

Housing-related companies and carmakers are leading the cutbacks in staff as costs of fuel and raw materials have surged and consumer demand has waned.

Automakers, Airlines

General Motors Corp., buffeted by a U.S. sales collapse and three years of losses, will cut its management payroll by 20 percent and might cut thousands of additional factory jobs as it further trims production capacity, Chief Executive Officer Fritz Henderson said on July 15.

Northwest Airlines Corp., the carrier being bought by Delta Air Lines Inc., will eliminate 2,500 jobs, or about 8 percent of its workforce, to counter record fuel costs, Eagan, Minnesota- based Northwest said July 9.

Northwest's move will boost industry-wide job cuts to about 20,000 as U.S. carriers park 400 jets after an 86 percent surge in jet fuel in the past year.

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

Last Updated: July 17, 2008 08:51 EDT