WASHINGTON - NEW claims for unemployment benefits jumped last week to their highest level in seven years due to the impact of a slowing economy and Hurricanes Ike and Gustav, the Labor Department reported on Thursday.

The department said new requests for jobless benefits for the week ending Sept 20 increased by 32,000 to a seasonally adjusted 493,000, much higher than analysts' expectations of 445,000.

Wall Street was more focused on Washington, though, where lawmakers and the administration appeared to be moving closer to a US$700 billion (S$994 billion) bailout package for the financial system. Stocks were headed for a moderately higher open.

The two hurricanes added about 50,000 new claims in Louisiana and Texas, the department said. The four-week moving average, which smooths out fluctuations, rose to 462,500.

Even excluding the effects of the hurricanes, jobless claims remain at elevated levels. Weekly claims have now topped 400,000 for ten straight weeks, a level economists consider a sign of recession.

A year ago, claims stood at 309,000.

The number of people continuing to draw jobless benefits last week was 3.54 million, up 63,000 from the previous week and nearly a five-year high. The four-week average of continuing claims was 3.49 million.

Hurricane Gustav first had an impact on jobless claims for the week ending Sept 13. The department said on Thursday that Louisiana reported an increase in claims of 18,409 during that week, mostly due to Gustav.

The financial crisis, falling home prices and slowing consumer spending continue to apply the brakes to the US economy. The unemployment rate jumped unexpectedly to 6.1 per cent in August, the highest level in five years.

Last week, drug maker Schering-Plough Corp said it plans to cut 1,000 sales jobs to reduce costs, part of a 10 per cent reduction in staff announced in April. Also, the nation's largest chicken producer, Pilgrim's Pride Corp, announced it would reduce 100 jobs besides the 600 job losses it previously announced. -- AP