May 15 (Bloomberg) -- The number of Americans filing first- time claims for unemployment insurance rose last week, and the total receiving benefits climbed to the highest level in more than four years, a sign the labor market continues to weaken.

The number of Americans filing applications for the first time increased to 371,000, in line with estimates, from 365,000 the prior week, the Labor Department said today. Total benefit rolls gained 28,000 to 3.06 million for the week ended May 3.

Companies are stepping up the pace of firings as the worst housing slump in more than a generation undermines home values, consumer spending and overall growth. Economists surveyed by Bloomberg News this month forecast consumer spending would increase this quarter at the slowest pace in 17 years.

``The trend in claims is still upwards and we expect new highs over the next few months,'' said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Economists had forecast claims would rise to 370,000, according to the median of 34 projections in a Bloomberg News survey. Estimates ranged from 350,000 to 380,000.

A separate report today showed that manufacturing in New York shrank in May for the third time in four months as factories bore the impact of the economic slowdown. The Federal Reserve Bank of New York's general economic index fell to minus 3.2, lower than forecast, from 0.6 percent in April, the bank said today. Readings less than zero signal contraction.

Four-Week Average

The four-week moving average for initial claims, a less volatile measure, dropped by 1,000 to 365,750. Total benefit rolls rose in the week ended May 3 to the highest level since March 2004.

The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, held at 2.3 percent. Twenty-six states and territories reported an increase in new claims, while 27 had a decrease. These data are reported with a one-week lag.

Claims, which reflect weekly firings, tend to rise as payroll numbers, which show monthly hiring, decline. So far this year, initial jobless claims have averaged 356,500, compared with 321,000 a week for all of 2007, when the economy created 91,000 new jobs each month on average.

The U.S. lost 20,000 jobs in April, the fourth straight decline, the government said May 2. The smaller-than-predicted decline signaled the labor market, while weak, was not as poor as in previous economic downturns.

Historical Comparison

``Initial claims will not reach the levels seen in previous recessions, as payrolls are much leaner than is typical when the economy begins to weaken,'' Ryan Sweet, an economist at Moody's Economy.com in West Chester, Pennsylvania, said before today's report. ``This has allowed businesses to adjust their employment almost entirely by reducing hiring.''

Economists surveyed by Bloomberg in the first week of May forecast the economy would grow at a 0.1 percent pace in the second quarter, the slowest since the 2001 recession. That would follow 0.6 percent growth in the prior two quarters.

Household spending may rise at a 0.5 percent pace, half the first quarter's gain and the smallest increase in 17 years, the economists surveyed said.

Financial services companies with exposure to the subprime mortgage market have been especially hard-hit by the slump. In the past 10 months, the world's biggest banks and securities firms have cut 65,000 jobs, according to Bloomberg data.

JPMorgan Cuts

JPMorgan Chase & Co., the third-largest U.S. bank, may eliminate 4,000 of its own staff as it brings on employees from the purchase of Bear Stearns Cos., a person familiar with the matter said this week.

Of the cuts, about 2,000 will be JPMorgan employees replaced by those who held the same jobs at Bear Stearns, the person said, declining to be identified because the decisions aren't final. As many as 2,000 other workers at the New York-based bank could be terminated as investment banking slows.

Chief Executive Officer Jamie Dimon said at a May 12 conference that JPMorgan found spots for 6,000 of Bear Stearns' 14,000 employees.

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

Last Updated: May 15, 2008 08:45 EDT