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WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits rose more than expected last week, but probably not enough to suggest the labor market recovery was taking a step back.
A separate report on Thursday showed the economy expanded at a sluggish pace in the fourth quarter of 2012 although a big gain in business investment and higher exports of services led the government to push up its previous estimate for growth.
The Labor Department said initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 357,000. Despite the gain, they were in the middle of their range for this year.
Stock index futures briefly trimmed gains after the two reports were releases.
The four-week moving average for new claims, a better measure of labor market trends, rose 2,250 to 343,000. Still, for many economists a trend reading below 350,000 level points to a firm pace of hiring in March.
A government report due on April 5 is expected to show employers added 197,000 workers to their payrolls in March. That would be slower than during the prior month but still suggestive of a labor market recovery that is gaining traction.
Despite recent a recent acceleration in hiring, the Federal Reserve has appeared worried that budget tightening by the government could dampen progress made in the labor market, and policymakers last week pledged to keep buying bonds at a monthly pace of $85 billion until the labor market outlook improved substantially.
"The underlying growth trend is showing some encouraging signs, but the key risk is how much fiscal tightening we'll see this year," said Laura Rosner, economist at BNP Paribas in New York.
A rash of recent data has shown the economy gathering strength. Retail sales have been stronger than expected, manufacturing output has picked up and employment growth has quickened, with the jobless rate dropping to 7.7 percent last month from 7.9 percent in January.
In a separate report, the Commerce Department said gross domestic product expanded at a 0.4 percent annual rate in the last three months of 2012, just below the 0.5 percent gain forecast by analysts in a Reuters poll.
The growth rate was the slowest since the first quarter of 2011 and far from what is needed to fuel a faster drop in the unemployment rate.
It was, however, higher than the government's previous estimate of a 0.1 percent growth rate.
Much of the weakness came from a slowdown in inventory accumulation and a sharp drop in military spending. These factors are expected to reverse in the first quarter.
Consumer spending was more robust by comparison, although it only expanded at a 1.8 percent annual rate. That was a slower pace of growth than the government had previously estimated.
Household spending powers about 70 percent of national output, and this still-lackluster pace of growth suggests underlying momentum in the economy was quite modest as it entered the first quarter, when a series of fiscal austerity measures began.
Thursday's report is the government's third estimate of growth for the final three months of 2012. In the first estimate, the government shocked economists by saying the economy shrank at a 0.1 percent annual rate.
Thursday's report showed the reasons for the meager pace of economic activity were mostly as initially estimated.
Inventories subtracted 1.52 percentage points from the GDP growth rate during the period, a bit less of a drag than in the second growth estimate, which was published on February 28. Defense spending plunged at a 22.1 percent rate, shaving 1.28 points off growth as in the previous estimate.
There were some bright spots, however. The report showed business investment rose at a 13.2 percent rate, a bigger gain than initially estimated. The extra growth was mostly from more construction spending by businesses.
Reporting by Jason Lange; Additional reporting by Lucia Mutikani in Washington and Richard Leong in New York; editng by Clive McKeef