Washington ? More Americans sought unemployment benefits last week, in part because some businesses were forced to shut down after tornadoes wreaked damage upon the Midwest.

The Labor Department reported Thursday that new applications for state unemployment insurance rose by a seasonally adjusted 7,000 to 428,000 for the work week ending May 17. That marked the highest level in two weeks and pushed claims to a higher point than the 420,000 level economists were predicting.

Although anxious workers, jobless Americans and cautious businesses have been struggling amid the sputtering economy, the rise in claims last week was due largely to layoffs at businesses that were shut down or disrupted by tornadoes that tore through some states in the Midwest, a Labor Department analyst said.

Still, for 14 straight weeks, new claims have been above the 400,000 mark, a level associated with a sluggish job market.

The more stable, four-week moving average of new jobless claims, which smooths out weekly fluctuations, however, dropped by 7,750 to 433,000 last week. That represented the lowest level since April 12 and offered an encouraging sign that businesses — while still keeping work forces relatively lean — are reducing the speed at which they lay off workers.

And, in another small dose of goods new, the number of workers who continue to draw jobless benefits fell by 36,000 to 3.7 million for the work week ending May 10, the most recent period for which that information is available. That marked the lowest level since April 26.

“The labor market remains a weak link in the economic recovery, but even incremental improvement is welcome,” said Oscar Gonzalez, economist at John Hancock Financial Services. “Nevertheless, it’s an awful time to be looking for a job and a fairly nerve-racking time even if you have one.”

On Wall Street, however, the Dow Jones industrial average gained 77.59 points to close at 8,594.02, lifted by news that President Bush would sign a tax cut bill into law.

The new figures came as Congress seemed poised to pass legislation extending federally paid jobless benefits — a program which is due to expire May 31.

Even if businesses slow the speed at which they layoff workers, businesses aren’t expected to be in a rush to hire, economists say.

The nation’s jobless rate jumped to 6 percent in April as businesses cut jobs for the third straight month. The economy has lost a half million jobs in the last three months, a decline usually associated with recessions.

Some economists believe the jobless rate will creep higher — to around 6.3 percent to 6.5 percent later this year — even if the economy improves a bit in the second half of this year, as some analysts hope. Job growth probably won’t be strong enough to accommodate all the additional job seekers who would enter the market, attracted by an improved climate.

The worsening job climate is troubling because it could make consumers — the main force keeping the economy going — more cautious, economists say.

Federal Reserve Chairman Alan Greenspan told Congress Wednesday that the “economy continues to be buffeted by strong cross currents.”

He said that recent economic reports on employment and production have been “on the weak side.” But improved conditions in financial markets and strong productivity gains — a key to the nation’s long-term economic well being — augured well for the economy’s future.

Some economists believe the Fed may reduce a key interest rate now at a 41-year low of 1.25 percent at the central bank’s next meeting on June 24-25. Economists said concerns raised by Greenspan and his Fed colleagues over the remote possibility that the country could face a rare episode of deflation — a widespread and prolonged decline in prices — raise the odds of a rate reduction.