THE number of Americans filing new claims for jobless benefits fell last week and a trend reading hit a near five-year low, a sign the grinding recovery in the US labor market remains on track.

Other data yesterday showed a sharp drop in productivity in the fourth quarter due to weak economic output.

Initial claims for state jobless benefits dropped by 5,000 to a seasonally adjusted 366,000, the US Labor Department said. That was a higher level than analysts had expected, although the downward trend in layoffs still suggests the economy is strong enough that employers will need to add to their workforce.

"The labor market is improving, but certainly not at a robust rate by any means," said Russell Price, an economist at Ameriprise Financial in Troy, Michigan.

Claims have trended lower recently and are around their lowest levels since the early days of the 2007-09 slump.

The four-week moving average for new claims, a gauge of the trend in layoffs, fell 2,250 to 350,500. That was the lowest level since March 2008, suggesting a steady improvement in labor market conditions.

However, while employers have pulled back on layoffs, they have only added jobs at a lackluster pace since the end of the recession.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid increased 8,000 to 3.22 million in the week ended on January 26.

"It still shows that the US job market is on a lethargic pace to recovery," said Joe Manimbo, a market analyst at Western Union Business Solutions in Washington.

Claims were volatile in January due to the timing of holidays and the dates on which weeks ended, but a Labor Department analyst said some of that volatility appeared to be receding. The analyst said there was nothing unusual in the data, and no states estimated their readings.

Productivity slumps

A separate report showed US nonfarm productivity fell in the fourth quarter by the most in nearly two years as output increased only marginally despite steady gains in employment.

Productivity slid at a 2 percent annual rate, the sharpest drop since the first quarter of 2011 and a larger fall than the 1.3 percent forecast in a Reuters poll.

Output rose 0.1 percent outside the farm sector, while hours worked gained 2.2 percent.

Productivity may rebound in the current period because analysts believe weak output during the fourth quarter was partially due an unusually sharp fall in government spending on the military.