The number of U.S. workers filing for jobless aid unexpectedly shot higher last week but did not alter the view labor markets are recovering as the jump reflected Easter holiday volatility.

Initial claims for state unemployment benefits rose 18,000 to a seasonally adjusted 460,000, the Labor Department said on Thursday, well above market expectations for 435,000.

A Labor Department official said the spike in claims reflected difficulties in seasonally adjusting the data around a moving holiday like Easter. A March 31 holiday in California and the end of the quarter also contributed to the rise.

However, other data showed Easter was a boon for retailers who saw sales jump. Analysts expect unusual shifts in the claims data to continue for a few weeks.

Looking past this volatility, claims are trending lower and that's indicative of a notable decline in firings. The question that remains is how much strength is there in hiring, this is where there is still uncertainty, said Michelle Meyer, an economist at Barclays Capital in New York.

But investors took a dim view of the report. Together with doubts over Greece's ability to tackle its debt crisis, the data helped drive U.S. stock prices lower. U.S. government bond prices rose marginally.

The four-week moving average of new claims, which irons out week-to-week volatility, rose 2,250 to 450,250 last week.

EARLY RECOVERY

Jobs remain the missing link in the economic revival that started in the second half of 2009 after the worst recession since the 1930s. But there are heartening signs labor markets are in the early stages of recovery.

A government report last Friday showed employers, led by the private sector, added 162,000 jobs in March -- the largest monthly gain in three years.

While the Easter holiday played havoc with the claims data, it helped top U.S. retailers beat Wall Street same-store sales expectations. A pickup in consumer spending expanded from discounters to department stores and teen clothing chains. See

Analysts are hopeful tentative healing in the labor market will support consumer spending and strengthen the recovery.

In a hopeful sign for the labor market, the number of people still receiving benefits after an initial week of aid fell to its lowest level since December 2008, the Labor Department said.

That took the insured unemployment rate, which measures the percentage of the insured labor force that is jobless, down to 3.5 percent, the lowest since January 2009, from 3.6 percent in the prior week.

While companies have resumed hiring, the pace remains too slow to make a huge impact on the 8.2 million people who lost their jobs since the recession struck in December 2007.

The Labor Department report showed more than 10 million Americans are receiving some form of unemployment benefits.

This suggests that while private sector hiring may have turned a corner, it has not done so with enough force to materially eat into the vast numbers of people still unemployed, said Anna Piretti, an economist at BNP Paribas in New York.

Government data last week showed a record 44.1 percent of the 15 million unemployed people in March had been out of work for 27 weeks or more.

(Editing by Andrew Hay)

BNP Paribas Easter