The number of US workers filing new jobless claims hit a 9-month low last week, and retailers posted their first monthly sales gain in over a year, easing fears recovery from recession would be unsustainable.

The Labor Department on Thursday said first-time applications for unemployment benefits dropped 33,000 to a seasonally adjusted 521,000 last week, the lowest level since early January. That was below market expectations for 540,000.

Separately, September sales at major domestic retailers showed the first monthly increase since August 2008. It was a sign consumer spending has started to recover and the economy was growing again after the worst recession in 70 years.

"The labor market is improving, but rather slowly," said Cary Leahey, economist at Decision Economics in New York. "Both the initial and continuing claims numbers suggest that October ought to be a better month for payrolls than September."

US stocks ended higher on the claims data and a surprise quarterly profit from Alcoa Inc. Forecast-beating results from major US retailers also buoyed sentiment.

Weak demand for a sale of $12 billion in reopened 30-year US government bonds weighed on Treasury debt prices. The 30-year bond lost over a full point as investors feared appetite for US debt was waning after huge supply.

ECONOMY GROWING AGAIN

The jobless claims report was a relief after data last week showed US employers cut 263,000 jobs in September, far more than the market was expecting.

Data suggests the economy started growing in the third quarter after a recession that started in December 2007, but a persistently weak labor market is casting doubts over the strength and sustainability of recovery.

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