WASHINGTON - NEW claims for jobless benefits fell unexpectedly last week but the number of Americans continuing to claim benefits reached a 26-year high.

The Labour Department reported on Thursday that initial claims for unemployment insurance dropped to a seasonally adjusted 509,000, from an upwardly revised figure of 530,000 for the previous week.

That's significantly below analysts' estimates of 537,000, according to a survey by Thomson Reuters.

But other figures showed the labour market remains weak due to the recessionary economy. The National Bureau of Economic Research said Monday that the economy fell into a recession in December 2007.

The number of people continuing to claim unemployment benefits last week reached 4.09 million, the highest level since December 1982, when the economy was in a steep recession. More workers continuing to claim benefits is an indication that unemployed workers are having a harder time finding new jobs.

The four-week average of initial claims, which smooths out fluctuations, increased to 524,500, also the highest level since December 1982, the department said.

The US work force is roughly 50 per cent larger than it was in the early 1980s. The department said the proportion of workers continuing to receive jobless benefits has reached its highest level since September 1992, when the economy was slowly recovering from recession.

Jobless claims have soared in recent months as the housing slump and financial crisis caused consumers and businesses to cut back their spending. Initial claims last month reached a 16-year high of 543,000.

A year ago, initial claims stood at 340,000.

Employers have eliminated jobs every month this year, shedding 1.2 million positions through October. That has sent the unemployment rate to a 14-year high of 6.5 per cent. Economists expect the Labour Department will report on Friday that the rate increased to 6.8 per cent in November and that companies cut another 320,000 jobs.

Large layoffs are occurring across many sectors of the economy.

JPMorgan Chase & Co said this week it will eliminate 9,200 positions at failed thrift Washington Mutual, which it acquired in September.

Jet engine maker Pratt & Whitney, a subsidiary of United Technologies Corp, financial services firm State Street Corp. and mining company Freeport-McMoRan Copper & Gold also announced layoffs this week -- AP