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New jobless claims fell more than expected last week from a 16-year high, the government said Wednesday, though they remain at elevated levels due to the slowing economy.

The Labor Department reported that initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000. That is lower than analysts' expectations of 537,000.

Despite the improved number, initial claims remain at recessionary levels. The four-week average, which smooths out fluctuations, rose to 518,000, its highest level since January 1983, when the economy was emerging from a steep recession.

The number of people continuing to claim unemployment insurance also dropped unexpectedly to 3.96 million, down from the previous week's 4.02 million, which was the highest level in 25 years. The labor market has grown by about half since 1983.

Economists consider jobless claims a timely, if volatile, sign of how fast companies are laying off workers. Employees who quit or are fired for cause are not eligible for benefits.

The economy has been hit hard in recent months by the housing slump and the broader financial crisis, which have led consumers and businesses to cut back on spending.

Higher unemployment could lead to a downward spiral, as laid-off workers are more likely to fall behind on mortgage payments and other debt. Those who remain employed also may become more conservative in their spending.

Applications for unemployment benefits soared to the highest level since just after the Sept. 11, 2001, terrorist attacks while the trade deficit shrank more than expected as demand for imports plunged, further evidence of the struggling U.S. economy.

The Labor Department reported Thursday that jobless claims shot up by 32,000 last week to a seasonally adjusted 516,000, the highest total in seven years. The tally was much higher than analysts expected and a further indication of how much the labor market is deteriorating amid the shrinking economy. The government reported last week that the unemployment rate surged to a 14-year high of 6.5 percent in October.

Meanwhile, the Commerce Department said the trade deficit declined by a bigger-than-expected amount in September, falling by 4.4 percent to $56.5 billion as imports experienced a record plunge.

The import decline was led by a huge fall in imported oil as the average price for crude dropped by a record $12.41 per barrel and the volume of shipments fell to the lowest level in five years. But demand for other types of imports also fell, with imported cars and car parts dropping to the lowest level in more than five years, an indication that foreign automakers are feeling the pinch hitting U.S. consumers.

President-elect Barack Obama has said that dealing with the worst financial crisis to hit this country in seven decades will be his No. 1 priority when he takes office, and his Democratic allies in Congress were laying the groundwork for changes with hearings scheduled Thursday.

The House Oversight Committee will examine the role hedge funds may have played in recent market turbulence. Among those scheduled to testify was billionaire investor George Soros, chairman of Soros Fund Management.

Meanwhile, the Senate Banking Committee will hear from executives of a number of financial institutions including Bank of America (nyse: BAC - news - people ), JPMorgan Chase (nyse: JPM - news - people ) and Wells Fargo (nyse: WFC - news - people ) on the issue of how the government's $700 billion rescue effort is operating, and particularly whether the government should be requiring more commitments on the use of the money to address rising mortgage foreclosure problems.