U.S. jobless claims jumped unexpectedly last week to their highest level since October, suggesting the labor market is still in a rut despite signs of improvement in the economy.

The U.S. trade deficit narrowed unexpectedly in November as exports climbed to the highest level in more than two years, government data showed on Thursday.

U.S. producer prices rose more than expected in December as energy and food costs surged while underlying inflation remained subdued, highlighting a divergence that complicates the outlook for monetary policy.

KEY POINTS: * The number of Americans filing for first-time unemployment benefits rose to 445,000 from an upwardly revised reading of 410,000 in the prior week, the Labor Department said. * It was the biggest one-week jump in about six months, confounding analyst forecasts for a small drop to 405,000. * A Labor Department official noted the rebound occurred following the holidays, which may have hindered reporting of new claims and created a backlog. * The trade gap dipped to $38.3 billion from $38.4 billion in October, the Commerce Department reported. * Analysts surveyed before the report had expected the November trade deficit to widen slightly to $40.5 billion from October's originally reported $38.7 billion. * November's deficit was the lowest since January 2010. * Prices at the wholesale level climbed 1.1 percent after a 0.8 percent rise in November, the Labor Department said. * Economists had been looking for a repeat of that 0.8 percent advance in December. * Inflation excluding food and energy, however, rose just 0.2 percent, in line with forecasts. That left the year-on-year gain in core producer prices at 1.3 percent, just below analyst estimates.

COMMENTS:

ROBERT DYE, SENIOR ECONOMIST, PNC FINANCIAL SERVICES, PITTSBURGH:

PPI: We are starting to see a little more pressure from commodities. It's not broad-based across the economy. It's cost push but we are not getting a pull from higher demand. Producers have not been able to pass on the costs to consumers as demand is still weak.

But eventually this means corporate profits could be squeezed. That's a developing headwind over the next several quarters which bears watching.

INTERNATIONAL TRADE: Trade is stronger-than-expected, which bodes well for fourth quarter GDP. It raises possibility that Q4 GDP could finish at the upper end of expectations, closer to 3.5 percent. This momentum in trade should carry over into 2011.

JOBLESS CLAIMS: It's an obvious disappointment. But it's coming at time when seasonal adjustments like weather and spacing of the holidays have an impact on a high frequency data like this.

Labor conditions are improving, but they are not improving as quickly as we would like. There are still soft spots out there. By and large, we are going in the right direction.

ANDREW WILKINSON, SENIOR MARKET ANALYST AT INTERACTIVE BROKERS GROUP IN GREENWICH, CONNECTICUT:

The claims number fuels the debate over the real health of the labor market after last week's payroll number. But while this is mildly disappointing, it isn't enough to throw a kink in the idea of a global economy. I don't necessarily think this is a really bad number, but it's something that's bound to disappoint in the short-run.

MICHAEL WOOLFOLK, SENIOR CURRENCY STRATEGIST, BNY MELLON, NEW YORK:

Jobless claims were somewhat of a surprise, suggesting that the employment picture is not as rosy as expected. We got a taste of that last Friday with the non-farm payrolls report. But this is just weekly data and one week does not a trend make. Overall today's U.S. data looked positive for the economy and supportive of the dollar in terms of fundamentals with improving producer prices and narrower trade deficit.

OMER ESINER, MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON:

I'd say the data was considerably worse than the recent run of economic news we've had. It comes at a time when the dollar was already under some pressure overnight and it's exacerbated some of those losses for the greenback. The jobless number highlights the patchy recovery we've seen in the job market and reinforces that it will be a slow process bringing down the jobless rate. The one bright spot was a further decline in the trade deficit, which should contribute positively to fourth-quarter GDP. The euro gain, though, is largely a short-covering rally, with some speculation out there that we might see an increase in emergency funds. But I don't know how much more upside the euro has. There's still a long list of problems over there.

LINDSEY PIEGZA, MARKET ANALYST, FTN FINANCIAL, NEW YORK

JOBLESS CLAIMS: This is not a good start to January. While there is a drop in continued claims, I suspect it has more to do with people falling off the claims roll.

There are still seasonal adjustments that have to be worked out so I don't necessarily think it's a new trend.

This is not going to be easy process. This underlines the idea of an anemic recovery.

PPI: There's not much happening to the core. We see a tick up the headline number with the rise in food and energy prices. It's a pretty benign report.

TRADE BALANCE: Consumers did not respond that much to the retail enticements and they were not out there spending in December. Imports haven't been ramped up and retailers are holding in inventories. This signals a risk to a drag on growth in the first quarter.

MARKET REACTION: STOCKS: U.S. stock index futures add to losses after the data. BONDS: U.S. Treasury bond prices rise. FOREX: The dollar extends losses versus euro.

Retail Gdp Unemployment Trade balance