WASHINGTON (AP) - Fewer Americans applied for unemployment benefits last week and builders broke ground on more homes in May. The latest data offered some hope that the economy may be improving after hitting a slump in late spring.
Unemployment benefit applications fell to a seasonally adjusted 414,000, the Labor Department said. It was the second drop in three weeks and a positive sign that layoffs are slowing.
Still, applications have been above 400,000 for 10 straight weeks, evidence that the job market is weak compared to earlier this year.
Home construction rose last month to a seasonally adjusted annual rate of 560,000 units per year, the Commerce Department said. Economists say the pace of construction is far below the 1.2 million homes per year that must be built to sustain a healthy housing market. Many credit-strapped builders are struggling to compete with low-priced foreclosures.
The modest improvements in two of the economy's most troubled areas were enough to give Wall Street a lift after a major sell-off the previous day. The Dow Jones industrial average gained 64 points in afternoon trading. Broader indexes also rose.
Investors seemed to look past fears that Greece will be forced to default on its bonds - an event that could trigger another financial crisis - and a poor readout of manufacturing conditions in the Northeast from the Federal Reserve Bank of Philadelphia.
Unemployment applications had fallen in February to 375,000, a level that signals sustainable job growth. They stayed below 400,000 for seven of nine weeks. But applications surged in April to 478,000 - an eight-month high - and they have declined slowly since then.
Economists said the steady decline in unemployment applications signals that the job market is improving, but at a very slow pace.
The elevated level of applications suggests that companies pulled back on hiring in the face of higher gas and food prices, which have cut into consumer spending. Hiring has slowed sharply since applications rose.
While the job market was improving earlier this year, home building is coming off the two worst years on records dating back five decades. And the May data suggest that won't change anytime soon.
The number of single-family homes started in May rose a modest 3.7 percent. But the construction pace of single-family homes, which accounts for about 80 percent of all residential construction, is well below the 2010 rate. Construction of those traditional homes is "still very much dead in the water," said Mark Vitner, senior economist at Wells Fargo.
Housing permits, a gauge of future construction, rose last month to the highest level since December. But apartment and condominium construction accounted for a large portion of that increase. Renting has become a preferred option for many Americans who lost their jobs in the recession and who were forced to leave their rapidly depreciating homes.