While last week's increase was above Wall Street's expectations for a rise to 290,000, the claims numbers are very volatile around the Christmas holiday period.

"The claims data still point to relatively upbeat conditions in the labor market through some of the ups and downs in the weekly figures," said Daniel Silver, an economist at JPMorgan in New York.

Initial claims for state unemployment aid increased by 17,000 to a seasonally adjusted 298,000 for the week ended Dec. 27, the Labor Department said on Wednesday, after four straight weeks of declines.

The number of Americans filing new claims for jobless benefits rose more than expected last week, but the trend remained consistent with sustained strength in the labor market.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose only 250 to 290,750 last week. It has remained below the 300,000 mark for 16 straight weeks.



"Companies are not laying off workers for weak demand recession conditions," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York. "This means that unemployment will continue to fall at a fast rate."



U.S. stocks were trading marginally higher, while the dollar was little changed against a basket of currencies. Prices for U.S. Treasury debt were slightly up.

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A survey of consumers released on Tuesday by the Conference Board showed households in December were more upbeat than they had been in several years about prospects of getting a job.



The government is expected to report next week that nonfarm payrolls rose 240,000 in December after surging 321,000 in November, according to a Reuters survey of economists.



That would mark the 11th consecutive month of job gains above 200,000, the longest stretch since 1994. The unemployment rate is forecast to dip one-tenth of a percentage point to 5.7 percent, which would be the lowest since June 2008.



Other data on Wednesday showed factory activity in the Midwest cooled in December and a slight rebound in contracts to buy previously owned homes in November, but that did little to change perceptions the economy ended 2014 on solid footing.



The economy grew at its fastest pace in 11 years in the third quarter.

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The Institute for Supply Management-Chicago Business Barometer fell to 58.3 in December from November's reading of 60.8. A reading above 50 indicates expansion in the region's factories.



"While momentum moderated somewhat heading into year-end, the handoff to 2015 growth is likely to be quite positive," said Gennadiy Goldberg, an economist at TD Securities in New York.



Separately, the National Association of Realtors' pending home sales index, based on contracts signed in November, rose 0.8 percent.