565K new jobless claims, lowest level since Jan.

WASHINGTON – The number of newly laid-off workers filing initial claims for jobless benefits last week fell to lowest level since early January, largely due to changes in the timing of auto industry layoffs.

Continuing claims, meanwhile, unexpectedly jumped to a record-high. While layoffs are slowing, jobs remain scarce and the unemployment rate is rising, which some economists worry could weaken or delay a recovery. The unemployment rate rose to 9.5 percent last month and is expected to top 10 percent by the end of this year.

Separately, many retail chains reported disappointing June sales, as consumers are saving more and spending less.

New claims for unemployment insurance plummeted by 52,000 to a seasonally-adjusted 565,000, the Labor Department said Thursday. That's significantly below analysts' expectations of 605,000 for the week ending July 4, according to Thomson Reuters. The last time new claims were below 600,000 was week of Jan. 24.

"This is not as positive as it looks," Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients. "There are a number of special factors at play here, including the fact that the holiday-shortened week skewed the data."

The drop resulted partly from technical factors, a Labor Department analyst said. Auto layoffs that normally take place in early July, as factories are retooled to build the next year's models, occurred in the spring instead as General Motors Corp. and Chrysler LLC implemented sweeping restructuring plans.