Weekly claims data are often volatile and the figures released on Thursday by the Labor Department have little bearing on the government's closely watched monthly employment report, due on Friday, as they fall outside the survey period.

Still, they are indicative of a labor market that is struggling to gain momentum, putting a strain on the broader economy's recovery from its longest and deepest downturn since the Great Depression.

"While these numbers are volatile, we haven't really made progress in the labor market and that's kind of troubling when you think about the broader economic recovery," said Andrew Gledhill, an economist at Moody's Economy.com in West Chester, Pennsylvania.

"For the recovery to turn into a self-sustaining expansion, we need people to have wage income coming in and until that happens, we are still in a tenuous position."

Initial claims for state unemployment benefits rose 19,000 to a seasonally adjusted 479,000, the Labor Department said on Thursday. That compared to market expectations for a drop to 455,000.

The government is expected to report on Friday that nonfarm payrolls probably fell 65,000 last month after declining 125,000 in June as temporary workers hired to conduct the decennial census were let go.

Private-sector payrolls are seen rising a modest 90,000 and the unemployment rate is expected to climb to 9.6 percent from 9.5 percent in June.

This will be unwelcome news for President Barack Obama, whose popularity has tumbled amid growing unhappiness over the health of the economy, which is the top campaign issue for the November mid-term elections.

The sluggish pace of economic growth threatens to keep unemployment high for months, posing trouble for Democrats hoping to retain their congressional majorities.

Growth slowed to a 2.4 percent annual rate in the second quarter after expanding at a 3.7 percent pace in the first three months of this year.

After falling rapidly in 2009, jobless claims have stalled this year and are anchored above the 400,000 to 450,000 range that analysts say is normally associated with sustainable jobs growth.

Last week, the four-week average of new jobless claims, considered a better measure of underlying labor market trends as it irons out week-to-week volatility, rose 5,250 to 458,500.

"This report is indicative of weakness in labor market conditions as claims continue to trend sideways," said Michael Gapen, an economist at Barclays Capital in New York.

In other data on Thursday, US retailers posted July sales below analysts' expectations in the latest sign that skittishness about high unemployment and the economy are causing consumers to cut spending.

Some retailers that did manage to eke out gains, including several department stores, did so by taking customers from rivals, rather than from an increase in overall spending.

The 28 retailers tracked by Thomson Reuters reported a 2.9 percent rise in July sales at stores open at least one year, missing Wall Street forecasts of 3.1 percent rise. Of those, 17 reported lower-than-expected sales, while nine beat estimates.

In the week ended July 24, a total of 4.54 million people were still receiving benefits after an initial week of aid, down 34,000 from the prior week. Analysts polled by Reuters had forecast so-called continuing claims slipping to 4.54 million.

The number of people on emergency benefits increased 60,993 to 3.31 million in the week ended July 17. Congress last month restored aid to about 2.5 million unemployed Americans whose benefits had lapsed in May.

"We are likely to see some pick up in the number of extended and emergency claims in the short term, however, there are still large numbers of people who are reaching the maximum 99 weeks of benefits," said Yelena Shulyatyeva, an economist at BNP Paribas in New York.