Uncertainty over auto giants such as GM is affecting US unemployment and sales [EPA]

The Labour Department said on Thursday that initial claims for unemployment benefits fell last week to a seasonally adjusted 601,000, below estimates of 615,000 and the lowest such rate since January.

However, the number of people continuing to claim unemployment benefits still rose to a record 6.82 million in the week of May 30.

The figure means the US total unemployment rate jumped to 9.4 per cent in May, a 25-year high, the Labour Department said.

The news comes as US retail sales also rose for the first time in three months after demand in US vehicle dealerships and gas stations helped offset weak sales in department stores.

The US Commerce Department said on Thursday that retail sales increased 0.5 per cent last month, in line with economists' expectations.

US stocks rose after the job and retail sales data was released, with the Dow Jones Industrial Average up 77.09 points, or 0.88 per cent to 8,816.11 points in early morning trading.

Auto firm uncertainty

Economists say the rate of unemployed could reach 11 per cent by mid-2010 as college graduates and other new entrants start searching for a dwindling number of jobs.

Unemployment will also continue to be affected by uncertainty in the ailing auto sector, where General Motors and Chrysler LLC have filed for bankruptcy protection and plan to cut tens of thousands of jobs as part of restructuring.

And while auto sales rose by 0.5 per cent last month, sales are still 21.5 per cent below where they were a year ago as auotmakers continue to struggle with the worst sales environment in decades.

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