New U.S. claims for unemployment benefits unexpectedly climbed to 424,000 last week from a revised 414,000 in the prior week, pointing to a painfully slow improvement in the nation's job markets.

Corporate profits in the U.S. unexpectedly contracted in the first quarter to record their first decline in more than two years and the economy grew at the same pedestrian pace as previously estimated, a government report showed on Thursday.

KEY POINTS:

* The Labor Department on Thursday revised the prior week's claims number up from an originally reported 409,000. Economists surveyed by Reuters had forecast that claims last week would decline to 400,000, rather than rise. * The four-week moving average of unemployment claims, considered a better measure of trends since it smoothes out weekly variations, eased slightly to 438,500 from a revised 440,250.

* Gross domestic product growth was unrevised at annual rate of 1.8 percent, the department said in its second estimate, below economists' expectations for a 2.1 percent pace.

COMMENTS:

GARY THAYER, CHIEF MACRO STRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS, MISSOURI

The softness in consumer spending is what we should keep our eye on. Clearly consumers are vital to the recovery. With higher energy prices in the second quarter we would not expect consumption to be a lot better than the number we saw this morning. It was revised to a 2.2 percent growth rate from 2.7 percent. The economy is still growing; that's the good news. The disappointment is that it's softer than a lot of people were hoping to see at this point in the cycle.

Unfortunately, new jobless claims are holding above the 400,000 level which suggests job creation may taper off a bit, but we think that's just temporary. We're still in the point in the business cycle where companies need to hire workers. Even if the economy isn't growing very fast, we'll probably see decent job growth compared to what we saw last year.

CARY LEAHEY, SENIOR ECONOMIST AND MANAGING DIRECTOR, DECISION ECONOMICS, NEW YORK

Claims are soft. It's indicative of some significant slowdown in employment growth relative to the last few months, but I don't know anyone who will have the courage to pencil in a troubling May payrolls number. The market would argue that any figure in the neighborhood above 125,000 would be disappointing. but not earth shattering. Savier investors remember there's a certain amount of volatility in the payroll series.

DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

On revised Q1 GDP:

The big surprise on the downside is that consumer spending was revised lower to 2.2 percent from 2.7 percent, with even larger downward revisions to real disposable income, while core PCE prices also saw a marginal downward revision, to 1.4 percent from 1.5 percent...While rebounds from temporary problems in Q1 weather and defense are still seen, Q2 has its special negative factors too (notably the hit from Japan, particularly in autos). Q1 data that suggests the underlying picture, particularly from the consumer, was weaker than previously thought, may push estimates for Q2, recently mostly on the firm side of 3.0 percent, to a little below 3.0 percent.

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

On jobless claims:

Given that nothing unusual was reported as having skewed the data, this fourth gain in the past seven weeks adds to worries that the labor market advancements -- much like other market indicators (especially manufacturing) -- have lost momentum. As we are about to enter another seasonally volatile season (factory closures) even somewhat more sensitive to hardships given supply chain shortages from Japan, it will take some time to interpret unbiased layoff trends.

Unemployment