The number of Americans filing first-time claims for unemployment insurance remains at historically high levels as the credit crunch continues to wreak havoc on the job market. But don’t tell the stock market that.

First-time claims fell 20,000 to 654,000 in the week ended April 4 from a revised 674,000 a week earlier, which represented the highest uptick since 1982, the Labor Department said Thursday. Economists had forecast a drop to 660,000 from the 669,000 originally reported for the previous week.

The four-week moving average for initial claims, a less volatile gauge of labor market conditions, fell to 657,250 from 658,000, the report said. Despite the recent decrease in weekly claims, the number of people seeking unemployment insurance has been above 600,000 for 10 consecutive weeks.

The data comes on the heels of the government agency’s monthly jobs report, which showed the unemployment rate rising to 8.5% in March from 8.1% in February, the highest level since 1983. The data was in line with analysts’ expectations, however.

YTD is March 31, 2009

Since the recession began in December 2007, 5.1 million jobs have been lost, with a bulk of the losses occurring in the last five months alone. In March, job losses were spread across the major industry sectors, the Labor Department said.

Still, the stock market managed to ignore the bleak job reports by posting its fifth straight week of gains through April 9, suggesting to some that a recovery could be in the offing. The Dow Jones Industrial Average closed at 7837.11 last Thursday, April 9, 2009, representing a 19% jump from its March 9 close of 6547.05. Of course there is always the possibility that the stock market could go lower.

Employment data is generally viewed as a lagging indicator of economic strength. However, continued weakness in the job market can have an adverse effect on consumer confidence, and ultimately, spending habits. Generally, when workers are afraid of losing their jobs, they tend to spend less on discretionary items, economists say.

Indeed, a report published by Discover Financial Services (DFS) revealed that while consumer sentiment is improving, it may not necessarily mean that consumers will open up their wallets.

Discover’s U.S. Spending Monitor, a monthly index based on a scale of 100 points, rose 3.8 points to 79.5 in March. Among the 15,000 consumers surveyed last month, 15% said the economy was improving, an increase from a record-low 8% in February. Meanwhile, 61% expected the economic conditions to worsen, down from 70% in February and the lowest since October 2007.

The boost in confidence among consumers seemed to have little effect on their spending behavior, however. In March, 28% of the Discover survey respondents said they expected to spend less, while 17% said they would spend more. The figures are opposite from a year ago, when 36% of consumers planned to spend more while 16% planned on spending less.

“The good news is a few more consumers are feeling the economy has turned a corner and better days lie ahead,” said Julie Loeger, senior vice president of brand and product management for DFS, in a prepared statement. “But rising economic confidence has not changed consumers' spending behavior as a majority of them continue to anticipate cutting spending.”