Sliding US house prices and losses from the subprime mortgage market sparked a credit crunch last year that has slowed growth and hiring, despite aggressive cuts in interest rates by the Federal Reserve, the US central bank.
Officials hope conditions will start to slowly improve once the housing market hits its lowest point, although economists warn this may still be some way off.
"Anecdotally, there's a lot of foreclosed properties coming to the market. This is telling us any bottoming in the housing market will be very long and drawn out," said Richard DeKaser, chief economist at National City Corp in Cleveland.
Initial claims for state unemployment insurance benefits rose to a seasonally adjusted 406,000 in the week ended July 19, from a revised 372,000 the prior week, the US labour department said.
The levels were the highest since late March and above forecasts of 376,000 new claims.
A US labour department official said estimates were being affected by annual car factory closures, the end of the quarter, and the holiday-shortened July 4 reporting week.
The Ford Motor Company posted an $8.7bn in quarterly loss, as it wrote down the value of truck and sport utility vehicle (SUV) operations.
The loss was larger than analysts had forecast and sent Ford's shares down by seven per cent in pre-market trading on Thursday.
Ford announced a sweeping realignment of its North American operations intended to reduce its reliance on trucks and SUVs, by rolling out a range of smaller, more fuel-efficient vehicles and converting three truck plants to make cars.
Don Leclair, Ford's chief financial officer, said he was confident that the company had the cash needed to ride out the US downturn.
Ford, the second largest US-based vehicle manufacturer, reported a surprise profit in the first quarter, but later warned that a sharp shift in demand towards cars and away from large vehicles due to high petrol prices would pressure its results.