Jobless claims for the week ended June 30 rose 7,000 to 399,000, the

Labor Department

reported, in line with expectations.

Claims for the previous week were revised up to 392,000 from 388,000. The four-week average fell to 407,500 from 417,000. Meanwhile, continued claims rose to 3.035 million -- the highest level since 1992.

The data serve as a stark reminder of the race going on in the economy. With unemployment rising, consumer demand, which so far has held up remarkably well, is threatened. For the U.S. to avoid recession it's important that the manufacturing sector turns around before the consumer retrenches.

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The report also serves as prelude to the June

jobs report

, due out tomorrow. Economists polled by

Reuters

expect the unemployment rate to rise to 4.6% from May's 4.4%.