U.S. still bled by recession

By Alister Bull

WASHINGTON (Reuters) - The number of Americans claiming jobless aid hit a record in early April and groundbreaking for new homes slumped last month, but a top Federal Reserve official voiced hope the recession was ending.

"Today, the economy is still very weak, but there are some encouraging signs that support cautious optimism," Federal Reserve Bank of Atlanta President Dennis Lockhart said in a speech in New York on Thursday.

Wall Street stocks, taking heart from expectations of reassuring results from corporate bellwethers as economic conditions start to turn the corner, closed higher, with the Dow Jones industrial average .DJI rising 1.2 percent to 8,125.

New claims for jobless aid dropped unexpectedly last week in a potentially brighter sign for employment -- although the timing of the Easter and Passover holidays might have skewed the data -- while a steep decline in new housing starts may help work off a heavy overhang of unsold homes.

In addition, contraction in factory activity in the U.S. mid-Atlantic region slowed in April, according to a survey by the Philadelphia Fed. Its business index came in at minus 24.4 from minus 35 in March, somewhat better than a Reuters forecast for minus 32. A reading below zero signifies contraction.

There have also been other promising signs the severity of the recession may be fading. Nokia (NOK1V.HE) said on Thursday that mobile telephone destocking, as shops run down inventories before putting in new orders, had bottomed in some markets.

In addition, U.S. officials have clearly begun to talk up the recovery. Fed Chairman Ben Bernanke noted tentative signs of stability this week and Lockhart repeated this theme.

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