July 10 (Bloomberg) -- The number of Americans collecting unemployment benefits climbed to the highest level since December 2003, reflecting a deteriorating job market that threatens to hurt consumer spending.

The total number of people collecting benefits rose 91,000 to 3.202 million for the week ended June 28, the Labor Department said today in Washington. First-time jobless claims fell more than forecast in the week ending July 5 to 346,000, a figure distorted by annual July shutdowns at auto plants.

Rising unemployment will contribute to the weakest gain in consumer spending since 1991 by the final three months of the year, according to a monthly survey of economists by Bloomberg News. Starbucks Corp., the world's biggest coffee-shop chain, and IndyMac Bancorp Inc., a lender hurt by the mortgage collapse, are among companies announcing job cuts this month.

``The important thing here is the continuing rise in continuing claims,'' said Russell Price, senior economist at H&R Block Financial Advisors Inc. in Detroit. ``It shows a pattern that the labor market continues to deteriorate, and the people laid off are certainly having a difficult time finding employment.''

Treasuries, which had fallen before the report, stayed lower. Yields on benchmark 10-year notes rose to 3.83 percent at 8:43 a.m. in New York, from 3.81 percent late yesterday.

Weekly Claims

Initial jobless claims fell 58,000 to 346,000 in the week ended July 5, from a three-month high of 404,000 the prior week. Economists had forecast claims would fall to 395,000, according to the median of 41 projections in a Bloomberg News survey. Estimates ranged from 370,000 to 420,000.

Jobless-claims numbers can be difficult to interpret in July because it's the month when 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.

Last week's decline in claims was probably ``a question of timing,'' a Labor Department spokesman said. The government's seasonal adjustment formula anticipates auto layoffs in the first two full weeks of July, and fewer occurred last week than expected, the spokesman said.

Before the seasonal adjustment, claims rose 30,000 last week, Labor Department figures showed.

The four-week moving average for initial claims, a less volatile measure of the labor market, decreased to 380,500 from 390,500.

Jobless Rate

The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, rose to 2.4 percent from 2.3 percent. Twenty-five states and territories reported an increase in new claims, while 28 had a decrease. These data are reported with a one-week lag.

Weekly claims have averaged 362,000 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 steady at 5.5 percent, the government said on July 3. It was the sixth straight month of shrinking payrolls. The next jobs report is due Aug. 1.

Starbucks, based in Seattle, said July 1 it will close 600 U.S. coffee shops and eliminate as many as 12,000 jobs, the most in its history.

Last Recession

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.

A report this week from the Conference Board, a private New York research group, showed U.S. job prospects in June dropped to the lowest level since September 2004. The group's monthly Employment Trends Index aggregates eight labor-market indicators to forecast short-term hiring trends.

Higher food and energy prices have led some companies to cut staff. AirTran Holdings Inc., the low-fare airline that flies mostly in the eastern U.S., said this week it will cut 480 pilot and flight-attendant jobs to offset record fuel costs.

``We're doing what it takes to position ourselves better, rather than hoping things will change on their own,'' Kevin Healy, senior vice president of marketing and planning, said in a telephone interview. The Orlando, Florida-based company also needs to trim the number of baggage handlers and cut jobs in its corporate offices, Healy said.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Last Updated: July 10, 2008 09:11 EDT