The Conference Board said its index of leading economic indicators climbed 0.3% to 103.8, highest since September 2007. The coincident economic index was unchanged, while the lagging indicator fell 0.2%.

"The data indicate that economic recovery is finally setting in. We can expect slow growth through the first half of 2010," said Conference Board economist Ken Goldstein said .

But the gain was less than the 0.5% many economists expected.

"We're still getting some positive momentum, but it looks like things are slowing down again," said Jennifer Lee, economist at BMO Capital Markets. "A lot of the economic growth has largely been driven by the government stimulus packages."

Earlier Thursday, the government said the number of newly laid-off workers seeking unemployment insurance was unchanged last week from a week earlier, remaining above the level that would indicate the economy is adding jobs.

While new jobless claims — considered a gauge of the pace of layoffs and an indication of companies' willingness to hire — remain far above levels associated with a healthy economy, they are down about 22% from this spring.

The Labor Department said Thursday that first-time claims for jobless benefits were a seasonally adjusted 505,000, same as the previous week's revised figure and matching analysts' expectations. A year ago, there were 533,000 initial claims.

The four-week average, which smooths out volatility, fell for an 11th straight week to 514,000, lowest in almost a year.

While the steady decline in claims is evidence firings are decreasing, most economists say weekly claims would have to fall to about 425,000 for several weeks to signal that the economy is adding jobs. Some economists put the number higher, around 475,000.

Even as claims are falling and the economy has started growing, the unemployment rate is continuing to rise. It jumped to 10.2% in October from 9.8%, highest in more than 26 years, the government said earlier this month.

AOL said Thursday that when it is officially split from Time Warner next month, it will lay off about a third of its workforce, or about 2,300 people.

Federal Reserve Chairman Ben Bernanke said early this week that the economy is likely to grow at a "moderate" pace. As a result, the jobless rate "likely will decline only slowly."

The economy grew at a 3.5% annual rate in the July-September quarter, the government said last month. Many economists expect growth to slow in the current quarter as recent reports on industrial production and housing have been disappointing.

The number of people continuing to claim unemployment benefits, meanwhile, dropped by 39,000 to 5.6 million the week ended Nov. 7, the Labor Department said. The figures on continuing claims lag initial claims by a week.

The continuing claims figure does not include millions of people who have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

Nearly 4.2 million people were receiving extended benefits the week ended Oct. 31, up 120,000 from the previous week.

Congress added 14 to 20 weeks to the extended program Nov. 6, fourth extension since the recession began and the longest total extension on record. That boosted the total number of weeks a person could collect unemployment to as many as 99 in the hardest-hit states.

But more than 1 million people will run out of unemployment benefits in January unless Congress quickly extends federal emergency aid, a nonprofit group said Wednesday. The November extension didn't address an underlying problem: The emergency unemployment compensation program, including all additional weeks, expires at the end of this year.

Contributing: Reuters