New orders for long-lasting U.S. manufactured goods saw their biggest gain in 16 months in April and fewer workers filed for new jobless benefits last week, according to data on Thursday that suggested the deep recession was abating.

The Commerce Department said new orders for durable goods rose 1.9 percent from March, the biggest percentage advance since December 2007. However, March orders were revised sharply lower, falling 2.1 percent from the previously reported 0.8 percent decline.

A separate report from the Labor Department showed initial claims for state unemployment insurance dropped by 13,000 to a seasonally adjusted 623,000 in the week ended May 23, falling for a second straight week.

However, the number of people staying on benefit rolls after drawing an initial week of aid increased 110,000 to a higher-than-forecast 6.79 million in the week ended May 16.

In another report, the Commerce Department said sales of new single-family homes rose 0.3 percent to a 352,000 annual pace, from 351,000 in March.

The data are consistent with the view that the rate of contraction is slowing, but we are still working our way through a recession. We haven't hit a bottom yet, said James Masi, chief fixed income strategist at Stifel Nicolaus & Co in Baltimore, Maryland.

U.S. stock indexes fell amid disappointment that the advance in new home sales was not as big as the market had expected. U.S. Treasury debt prices held gains after the data. The U.S. dollar was flat.

The reports were the latest in a series that have raised optimism that the 17 month recession was starting to ease. Data on Wednesday showed an increase in the sales of previously owned homes.

But high unemployment, underscored by the Labor Department report showing that continued claims have set record highs in every week since January 24, indicate that any recovery after the recession will be painfully slow.

Continued claims are now more than double the level they were a year ago.

New orders excluding transportation climbed 0.8 percent in April after declining 2.7 percent in March, boosted by orders for communications equipment, machinery and fabricated metal products, the Commerce Department said.

The economy is hitting a low point and not deteriorating any further. ... We should see growth by the fourth quarter, said Kurt Karl, chief U.S. economist at Swiss Re, in New York.

However, there were some dark spots in the report. In the first four months of this year, new orders are down 27.3 percent from the same period last year.

Civilian aircraft and parts tumbled 6.8 percent in April after surging 7.5 percent in March.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.5 percent in April.

Inventories of manufactured durable goods fell 0.8 percent in April, declining for the fourth straight month.

April's modest increase in new home sales appeared to fit in with analysts' perceptions that sales probably bottomed in January when they tumbled to a record low 329,000 units.

The median sales price in April fell 14.9 percent to $209,700 from a year earlier, the department said. The median marks the half-way point, with half of all houses sold above that level and half below. However compared to March, the median price was up 3.7 percent, the biggest increase since November.

The inventory of homes available for sale in April fell 4.2 percent to 297,000, the lowest level since May 2001. April's sales pace left the supply of homes available for sale at 10.1 months' worth, the lowest since a matching reading in July.

In another sign of the bleak housing market, one out of eight U.S. households with a mortgage ended the first quarter late on loan payments or in the foreclosure process, the Mortgage Bankers Association said on Thursday.

(Additional reporting by Glenn Somerville in Washington and Lynn Adler in New York; Editing by Neil Stempleman)

Unemployment