By Lucia Mutikani

WASHINGTON (Reuters) - The number of U.S. workers drawing state unemployment benefits scaled another record high early this month, according to government data on Thursday that highlighted the difficulties of getting new jobs in the recession-hit economy

However, the number of people filing new claims for jobless benefits fell to a seasonally adjusted 646,000 in the week ended March 14, the Labor Department said, still at levels consistent with a distressed labor market. The prior week's number was revised up to 658,000 from 654,000.

Analysts polled by Reuters had forecast 652,000 new claims.

"The data continues to show a tough labor market," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

"Overall the data corroborates that the Fed needs to be more aggressive, which is what they're doing," he said.

The U.S. dollar pared losses against the euro, while government bond prices edged up after the data.

The Federal Reserve on Wednesday announced that it would buy up to $300 billion worth of long-term U.S. Treasuries to lower interest rates and help revive an economy now in its 15th month of recession.

The number of people staying on the benefits roll after drawing an initial week of aid surged 185,000 to 5.47 million in the week ended March 7, the latest week for which the data is available, from 5.29 million the previous week.

This was the highest on record and pushed the insured unemployment rate, the percentage of U.S. workers getting jobless benefits, to 4.1 percent from 3.9 percent the week before, the highest since June 1983.

Analysts had estimated the so-called continued claims would be 5.33 million.

"From a longer term perspective what concerns me about the U.S. economy ... (is) the grinding nature of this slowdown and how slow moving the effects of the financial crisis are proving to be," said T.J. Marta, founder and market strategist at Marta on the Markets, in Scotch Plains, New Jersey

"The job market downturn will last longer than any other job downturn in recent history."

Companies are responding to the severe downturn in demand that is squeezing their profit margins by cutting jobs, exacerbating the burden of households already staggering from a rapid decline net worth.

Since the recession started in December 2007, over 4 million jobs have been lost. The unemployment rate is at 8.1 percent, the highest level in 25 years.

The four-week moving average for new claims, considered to be a better gauge of underlying trends as it irons out week-to-week volatility, rose to 654,750, the highest since October 1982, from 651,000 in the week ended March 7. Continued...

The Labor Department will next week publish revisions for the series from 2004 to 2008 for both initial and continued claims.

(Additional reporting by John Parry and Ryan Vlastelica in New York, Editing by Andrea Ricci)

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