Dec. 28 (Bloomberg) -- U.S. initial jobless claims edged up last week and the number of people continuing to collect unemployment benefits rose to the highest level since January.

First-time jobless claims increased 1,000 to 317,000 in the week ended Dec. 23, the Labor Department said today in Washington. Continuing claims rose to 2.530 million in the week that ended Dec. 16 from 2.514 million in the prior week.

The data suggest that while companies remain reluctant to fire workers, unemployed Americans are having trouble finding new jobs. Slower employment growth poses a risk to consumer spending and an economy hampered by a weaker housing market.

``We could see the labor market slow, reflecting the current state of economic growth,'' said Rudy Narvas, an economist at 4Cast.com in New York. The rise in continuing claims ``could pose a downside risk to the payroll figure next week.''

The continuing claims figures cover the same week the Labor Department surveys businesses to calculate its monthly employment figures.

The jobless rate rose to 4.5 percent from a five-year low of 4.4 percent, the department's Dec. 8 report showed. Manufacturers shed 15,000 jobs last month, while builders cut 29,000 jobs, the most in more than three years, it said. Some economists expect job cuts in housing to accelerate.

``In the first half of next year, I'm looking for a hit to jobs,'' said Christopher Low, chief U.S. economist at FTN Financial in New York. Slowing residential investment will hurt, because ``that's where the big job losses are going to be.''

Economists' Forecasts

Economists had forecast initial jobless claims would rise to 320,000 from a previously reported 315,000 a week earlier, according to the median forecast of 29 economists in a Bloomberg News survey. Estimates ranged from 300,000 to 330,000.

The four-week moving average, a less volatile measure, fell to 315,750, the lowest in six weeks, from 326,000. Claims have averaged 312,000 so far this year, down from 332,000 for all of last year.

The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, held at 1.9 percent, today's report showed. These data are reported with a one-week lag.

Thirty-nine states and territories reported a decrease in new claims, while 14 reported an increase, the Labor Department said.

Initial jobless claims reflect firings and usually rise as payroll growth slows. The correlation between them has weakened this year. Job growth is measured by the government's monthly non-farm payroll report, which showed on Dec. 8 that employers in the U.S. last month added more workers than forecast.

Economic Growth

The economy grew last quarter at the slowest pace this year, dragged down by the biggest decline in homebuilding in 15 years, a report showed last week. Slower growth may allow Federal Reserve policy makers to hold the line on interest rates. They kept the benchmark overnight lending rate at 5.25 percent for a fourth consecutive time when they met Dec. 12.

Automakers faced with slower demand continue to pare staff and find ways to reduce spending. General Motors Corp., the world's largest automaker, said last week it will drop a third shift next month at a Tennessee factory and begin eliminating 500 temporary union workers. The Detroit-based automaker is transferring production of the Saturn Vue sport-utility vehicle to Mexico.

Earlier in the month, Sovereign Bancorp Inc. said that it will cut about 7 percent of its workforce as part of a plan to save $100 million. The Philadelphia-based lender said about 800 people will lose their jobs, with most of the cuts coming before the end of the year.

Other companies are adding workers. Delta Air Lines Inc., the largest U.S. carrier in bankruptcy, said Dec. 20 it has started hiring pilots for the first time since 2001 as it adds international flights. The Atlanta-based carrier began accepting pilots' applications last week and expects to finish recalls among its 360 furloughed pilots in 2007.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: December 28, 2006 09:04 EST