The Labor Department's weekly report on initial claims for state unemployment insurance took a surprising turn downward last week, coming in at an advance seasonally adjusted estimate of 565,000, down 52,000 from the prior week. Economists were expecting a drop of less than 5,000.

However, the report, released Thursday morning, also noted that the total number of people collecting unemployment benefits rose 159,000 to 6.88 million during the week of June 27. That pushed the insured unemployment rate up by a tenth of a percentage point to 5.1%.

Moreover, the four-week moving average of initial claims for the July 4 week came in at 606,000, a drop of only 10,000 from the week before. The moving average smoothes out sharp changes in the weekly estimate, which is particularly volatile at this time of year due to seasonal changes in employment patterns.

Unadjusted, jobless claims were actually up. The advance number of actual initial claims under state programs totaled 577,506 the week ending July 4, up 17,612 from June 27. There were 401,672 initial claims in the comparable week in 2008.

Stocks went from up moderately at market open to flat during the first half-hour of trading Thursday after the jobless report and a report on same-store retail sales that showed another month of declines in June.