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California, government shutdown lift U.S. jobless claims to 6-month high

WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits hit a six-month high last week amid a computer glitch in California, but the underlying trend pointed to a steadily improving labor market.

Initial claims for state unemployment benefits increased 66,000 to a seasonally adjusted 374,000, the highest level since the end of March, the Labor Department said on Thursday.

California, which is still dealing with technical problems from the upgrading of its computers, accounted for about half of the increase in claims, a Labor Department analyst said.

Troubles converting to the new system had resulted in a backlog of claims, which were now being pushed through, he said.

In addition, 15,000 of the claims were from nonfederal workers affected by the partial government shutdown, which is now in its second week, the analyst said.

Economists polled by Reuters had expected first-time applications to rise to 310,000 last week.

The claims data is collected by states and is the only government report being published during the shutdown and is being closely watched for clues on the health of the job market.

The four-week moving average for new claims, which irons out week-to-week volatility, increased 20,000 to 325,000. The measure remained at a level consistent with a moderate pace of job growth.

"The broader picture is still that labor market conditions are improving, albeit not quite as much as we previously thought," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

The dollar fell to a session low against the euro on the data, which traders viewed as a sign that the Federal Reserve would maintain its massive bond buying program for a while.

Minutes of the central bank's September meeting showed a decision to keep the monthly $85 billion in bond purchases that the Fed is making to keep borrowing costs low was a close call.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid fell 16,000 to 2.91 million in the week ended September 28.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)