(Reuters) – Microsoft Corp (MSFT.O) is close to buying business software company Yammer Inc for more than $1 billion, according to a source familiar with the details.

Microsoft’s interest in Yammer, known for its social networking functions, could allow the software giant to beef up its offerings for corporations.

A Microsoft spokesman declined to comment. A representative from Yammer did not immediately respond to a request for comment.

Backed by PayPal co-founder and Facebook (FB.O) investor Peter Thiel, Yammer said it counts more than 80 percent of Fortune 500 companies as clients. It raised more than $140 million in venture capital funding.

Bloomberg, which first reported the deal, said the announcement about the transaction was expected at the end of June.

(Reporting By Jennifer Saba; Editing by Marguerita Choy)

(Reuters) – Stocks dipped in choppy trading on Monday as rising Spanish and Italian bond yields indicated increasing fear of euro zone debt crisis contagion despite a victory for pro-bailout parties in the Greek election on Sunday.

Equity futures rose overnight on news Greece’s center-right New Democracy party, which backs Athens’ international bailout plan, will try to form a coalition after it won Sunday’s election.

But German Chancellor Angela Merkel said Monday she does not see any reason to speak about a new aid package for Greece on top of the two already agreed, slashing hopes that Athens would get more time to meet its fiscal targets.

The election results also offered little reprieve from contagion concerns as yields on both Italian and Spanish bonds rose, with Spain’s 10-year bond yield climbing above the 7 percent mark at which other highly indebted euro-zone nations were forced to seek bailouts.

“We don’t know how the Greek government is going to shape out and what reforms they’ll be able to put into place; there’s still considerable uncertainty in Spain about their bank issues,” said Tom Schrader, managing director of U.S. equity trading at Stifel Nicolaus Capital Markets in Baltimore. European authorities have agreed to a 100 billion euro ($125 billion) rescue for Spain’s troubled banks.

“As we go through this period of indecisiveness…you’re going to see the markets basically whip around in a sideways pattern.”

U.S. stocks rallied Thursday and Friday on news central banks of major economies would take steps to stabilize markets if necessary after the Greek vote, so much of the bullish bias of the election news was priced in.

Energy shares led declines on the S&P 500 as crude futures dropped 1.3 percent.

The Dow Jones industrial average fell 26.71 points, or 0.21 percent, to 12,740.46. The S&P 500 Index d1pped 0.96 point, or 0.07 percent, to 1,341.88. The Nasdaq Composite gained 10.81 points, or 0.38 percent, to 2,883.61.

The NAHB/Wells Fargo Housing Market index rose one point from the month before to 29, its highest level in five years, but still well below 50 needed to indicate a favorable view.

Still, homebuilder stocks rose and helped the S&P consumer discretionary sector gain for the day.

Pulte Homes shares rose 2.5 percent to $9.25 and Lennar Corp added 1.4 percent to $26.25.

European shares erased early gains and closed flat, with the FTSEurofirst 300 index unofficially down 0.01 percent.

DSW Inc plunged 11.9 percent to $51.79 after the footwear retailer gave guidance for its second-quarter and full-year earnings.

(Reporting by Rodrigo Campos, editing by Dave Zimmerman)

(Reuters) – China may soon control one of Britain’s top nuclear projects after two Chinese state firms teamed up with Western players to bid for the $24 billion development, industry and financial sources told Reuters.

China, which has the world’s largest foreign exchange reserves of $3.3 trillion, has been expanding into Europe’s energy and infrastructure sectors by buying stakes in firms such as Britain’s Thames Water and Portuguese utility EDP (EDP.LS).

The British government wants to see new nuclear plants built, but cost overruns in the wake of the Fukushima nuclear disaster and the slowing global economy have made it increasingly difficult for Western developers to find the billions of dollars needed for these projects.

Nuclear reactor builders Areva (AREVA.PA) and Toshiba-owned (6502.T) Westinghouse, which both want Horizon to use their reactor designs in Britain, have picked separate Chinese nuclear companies to help bid for Horizon.

“Areva and Westinghouse have both assembled consortiums of their own,” said one source, who is familiar with the bidding process but who refused to be identified, while a second source in the banking sector confirmed the bidders.

German utilities RWE (RWEG.DE) and E.ON (EONGn.DE), under pressure from Germany’s decision to phase out all nuclear power, announced in March the sale of Horizon, a Gloucester-based joint venture through which they had planned to invest 15 billion pounds ($24 billion) to build plants at two UK sites in Oldbury and Wylfa, with combined capacity of at least 6 gigawatts.

Westinghouse has teamed up with China’s State Nuclear Power Technology Corporation (SNPTC), expanding their existing collaboration in China, to make a bid, while Areva has linked up with China Guangdong Nuclear Power Holding Co (CGNPC) to put forward a separate offer, the sources said.

Westinghouse, Areva and SNPTC declined to comment, and officials at CGNPC could not be reached for a reaction.

Japanese bank Nomura, which is acting for RWE and E.ON in the sales process, imposed a June 15 deadline for offers, which are expected at several hundred million pounds.

Two other groups are also believed to have expressed an interest, with Japanese-U.S. joint venture GE Hitachi (GE.N) a likely candidate, one of the sources said.

GE Hitachi refused to comment.

The group has previously said it was interested in the UK nuclear market and that it planned to submit an application for design approval of its ESBWR reactor in the UK. [ID:nL5E7KF383]

Last year, SNPTC and Westinghouse extended by two years a partnership in China to build the U.S.-based firm’s AP1000 nuclear reactor.

CGNPC chose Areva’s EPR design for its Taishan nuclear power plant in China, and the two companies have founded an engineering joint venture in China.

Both the AP1000 and EPR designs have reached the final stages of regulatory approval in the UK.

Britain is trying to woo nuclear investors by reforming its electricity market in a way that guarantees a minimum price for producers of low-carbon energy, including nuclear power.

Energy Minister Charles Hendry last month called Horizon’s nuclear sites at Wylfa and Oldbury two of the most attractive sites in Europe to invest in new nuclear, adding that there had been strong interest in buying the joint venture.

In a separate project, French utility EDF (EDF.PA) and Areva, together with junior partner Centrica (CNA.L), are planning to build four EPRs in Britain, and a final investment decision for the first plant at Hinkley Point in Somerset is expected later this year. ($1 = 0.6382 British pounds) (Additional reporting by Jonathan Gould in Frankfurt, Caroline Jacobs in Paris and Wan Xu in Beijing, editing by Jane Baird)

(Reuters) – As Microsoft Corp prepares to show the world what its new Windows 8 can do on the next generation of high-powered tablets, initial reviews of the new operating system on existing hardware underscore the challenges the company faces with the radical redesign of its flagship product.

The world’s largest software company says millions of people are already using a downloaded pre-release version of Windows 8 on PCs, laptops and touch-devices ahead of its full introduction this autumn. At a media event in Los Angeles on Monday, the company is expected to discuss its plans to take on Apple Inc’s all-conquering iPad this holiday shopping season.

So far, most reviewers have praised the look and feel of the touch-friendly “Metro” style of Windows 8, which is based on colorful squares, or “tiles,” that depict applications such as email, and update in real time. But they have also stressed how difficult it will be for users to move away from what they know and trust.

“It’s a bit of a struggle for people who are deliberately oriented on a PC, that are used to a mouse feel,” said former Microsoft strategist Al Hilwa.

Now an analyst at tech research firm IDC, Hilwa has been trying out the latest demo release for two weeks. “Without a touchscreen, I struggled with a mouse to do certain things,” he said.

The new Metro interface only runs programs written for it, so users have to switch back to the traditional desktop to do certain tasks, like listening to music on Apple’s iTunes.

“The thing that really infuriates me is that it seems like Metro apps, and apps running in the normal desktop don’t have any knowledge of each other, ” said Forrester Research analyst David Johnson. “There’s no easy way to navigate between them, and I’m not quite sure why that is.”

The latest test version is not yet finished software. And outside of a few industry testers, no one has tried out Windows 8 on a tablet powered by ultra-efficient ARM Holdings chips, which is the closest Microsoft will come to challenging the iPad.

Microsoft is expected to say more about that on Monday, and there is talk that it might introduce a tablet under its own brand name. The company declined to comment on the reaction to the new system and its plans for the Monday event.

Nevertheless, Microsoft has not persuaded some of its most loyal users just yet.

“Right now, I’m not sold,” said analyst Michael Cherry of Directions on Microsoft, an independent research firm that focuses on the tech giant.

Cherry said he had persevered with Windows 8 for a few days, but had problems setting up email on his test machine. “I can’t rely on it as a production tool,” he said. “I can’t switch over yet. At this point, I should be able to leave Windows 7 behind.”

A former Microsoft program manager, Cherry worries that the initial complexity of the new system will prevent it from being an instant hit, like its predecessor, Windows 7.

“If a guy who has used Windows since Windows 1.0 can’t figure it out, then I’m going to guess there are other people out there who aren’t going to figure it out,” he said. “We won’t see line-ups at Best Buy at midnight. I’d love to see that, but it’s just not there.”

JURY DOUBTFUL

Mainstream tech reviewers like the Wall Street Journal’s Walt Mossberg or the New York Times’ David Pogue have not yet weighed in on the third and latest “preview” of Windows 8, which became publicly available online on May 31.

The smattering of reviews on tech-centric blogs have generally praised the new look of Windows 8, but almost everyone has stressed how difficult users will find the switch.

“I’ve felt almost totally at sea — confused, paralyzed, angry, and ultimately resigned to the pain of having to alter the way I do most of my work,” wrote Farhad Manjoo, technology columnist at online journal Slate, even as he acknowledged that there is a lot to love about Windows 8.

GeekWire — Microsoft’s hometown technology news website in Seattle — was no kinder, featuring a video of one reader’s father, completely stumped by how to get back to the Start menu. ( here )

“Bottom line, I’ve spent the past day feeling lost, and a little grumpy,” wrote GeekWire’s Todd Bishop, who has followed the software company as a reporter for more than a decade.

“Microsoft likes to use the words ‘fast and fluid’ to describe Windows 8, but two other words keep popping to my mind: ‘New Coke,'” wrote Bishop, referring to Coca-Cola Co’s short-lived attempt to reinvent its core product in the 1980s.

Gizmodo reviewer Mat Honan praised Windows 8’s “subtle elegance” and said the Metro apps were better and easier to navigate than the last test version, but added there was nothing that “bowls you over.”

ZDNet reviewer Ed Bott, a previous skeptic of Windows 8, liked the “rich and polished collection of Metro-style apps,” and was the only high-profile reviewer with a wholly positive reaction.

CONFUSION

To be sure, any great change to a system used by more than 1 billion people every day is bound to meet with resistance.

Microsoft’s Vista operating system got off to a terrible start in early 2007 due to its heavy memory demands and finicky security settings, but recovered somewhat in later updates. Almost three years later, its successor, Windows 7, became the company’s fastest-selling system to date, and has now racked up more than 500 million sales.

But Apple’s intuitive iOS mobile system has raised expectations, both for aesthetics and ease of use.

“I would not be able to give my mother – who is 76 – Windows 8 and expect her to be productive with it,” said Forrester’s Johnson. “But I’m also not sure that somebody in their 30s, or even 20s, wouldn’t be confused initially by the Metro interface either.”

Individual consumers and potential iPad buyers, rather than corporate customers, are the primary target for the Windows 8. Many big companies are still in the process of spending millions of dollars upgrading to Windows 7.

The success of the software will depend in part on the quality and price of machines running Windows 8, which is in the hands of PC makers such as Hewlett-Packard Co, Samsung Electronics, Lenovo Group and Acer Inc <2353.

But even if the machines are slick, Microsoft’s online Windows Store is still no match for Apple’s App Store, and will probably take several years to build momentum, which in turn removes incentives to buy tablets running the new Windows.

“I really want to use Windows 8,” said Cherry of Directions on Microsoft. “But I’m not sure they’ve gotten to nirvana. It’s a stake in the road that shows us where they want to get to – I’m not sure they are able to get there in one release.”

(Reporting By Bill Rigby; Editing by Jonathan Weber and Lisa Von Ahn)

(Reuters) – Delta Air Lines Inc (DAL.N) kicked off a sale on Memorial Day weekend that offered flyers one-way fares from New York’s LaGuardia Airport to Philadelphia for as low as $69.

The sale, which ended on Wednesday, was aimed at drawing attention to a host of new flights that forms the centerpiece of Delta’s effort to gain long-term supremacy in New York, the busiest U.S. air travel market.

Delta is spending at least $1.4 billion to add scores of flights and refurbish terminals at LaGuardia and John F. Kennedy International airports. In April it signed a pioneering deal to buy a Pennsylvania refinery to cut East Coast fuel costs. And it has invested heavily to boost its New York community profile, with major sponsorships of the Yankees, Mets and Knicks sports teams, as well as signing on as the official airline of Madison Square Garden.

Delta’s aggressive expansion positions it to woo business travelers from No. 1 United Continental Holdings Inc (UAL.N), the dominant carrier at New Jersey’s Newark airport, while also challenging bankrupt American Airlines and discounter JetBlue Airways Corp (JBLU.O), which are investing millions in their Big Apple hubs.

“Years ago, American was pretty large in New York. Now, Delta is dominant,” said Bebe Doyle of Doyle Associates, a corporate travel consultant based on Long Island, New York. “The Delta name is all over.”

At LaGuardia, Delta is offering 100 new nonstop flights this summer to 26 new destinations. The expansion was made possible by an unusual deal with US Airways Group Inc (LCC.N), which swapped air traffic slots at LaGuardia for Delta assets at Reagan National airport in Washington.

By summer’s end, Delta will operate more than 260 flights out of LaGuardia in addition to 180 mainly international routes from JFK, where it is spending $1.2 billion on a terminal upgrade. New York will be Delta’s biggest hub after its home base of Atlanta.

More than 105 million passengers passed through the New York area’s major airports in 2011, more than any other U.S. market.

“New York is a dogfight, and it’s really the holy grail for many of the competitors out there,” said Chuck Imhof, Delta’s managing director for New York sales.

LAGUARDIA IS KEY

Delta’s New York connection dates to 1937. Acquiring Pan Am assets in 1991 gave Delta the shuttle service that provides flights between LaGuardia and key business cities such as Boston and Chicago, as well as the iconic saucer-shaped Worldport building at JFK, which will meet the wrecking ball by 2015.

But LaGuardia, the site of a former amusement park 8 miles from midtown Manhattan in Queens, is the key piece of Delta’s New York strategy.

New flights focus on key regional markets as well as destinations including Dallas, Louisville, Kentucky, Miami and Burlington, Vermont. Delta is counting on boosting connecting traffic at LaGuardia to 25 percent, from 5 percent before the flight expansion, said Glen Hauenstein, executive vice president for network planning and revenue management.

Helane Becker, a New York-based airline analyst with Dahlman Rose & Co, says LaGuardia will prove more profitable for Delta than it was for US Airways because of the use of larger planes. Delta is using two-class regional jets that carry 70 passengers on many of its new flights, while US Airways had flown lots of smaller turboprops that seated 50 or fewer.

Vaughn Cordle, a consultant with AirlineForecasts LLC, which analyzes data for investors, estimates the flight growth could bolster Delta’s revenue from LaGuardia by $300 million to $500 million annually over time, while adding $10 million to $30 million to annual profit.

Delta has estimated the new flights from the slot swap could boost revenue by $200 million.

The carrier says it is already seeing a payoff from the LaGuardia changes with gains in higher-paying corporate clients. In April, the first full month after the swap took effect, unit revenue, an important industry measure, rose in the high-single digits at the old US Airways facility it is using at LaGuardia, Delta said.

Doyle, the travel planner, said a major United corporate account switched to Delta recently, citing the increased service in New York and in other cities. She said business travelers like recent upgrades such as Delta’s Economy Comfort seats that offer more legroom.

Ed Grassi, a vice president at investment counseling firm J.W. Burns & Co in East Syracuse, New York, who flies to LaGuardia every other week or so, said Delta’s regional jets make for smoother flying than the US Airways turboprops.

“Now I use Delta exclusively if I can,” Grassi said. He said the Delta’s fares are “very comparable to a lot of other airlines and lesser than US Airways.”

RIVALS INVESTING

Delta is not the only airline pouring money into New York. American Airlines, which has been operating under Chapter 11 protection since November, is spending $30 million on renovations at LaGuardia. In 2007 it spent $1.3 billion to complete its JFK terminal.

American once had a leading position at LaGuardia but now ranks No. 2 behind Delta, according to figures from the Port Authority of New York and New Jersey. American has also lost ground at Kennedy, where it ranks third in market share by passengers after JetBlue and Delta.

“Now that (American is) in restructuring, competitors will probably try and take advantage of that,” said Ray Neidl, an aerospace analyst with Maxim Group. A merger with US Airways, which has expressed interest in a tie-up, would help American better compete in the U.S. East, he added.

JetBlue Airways, meanwhile, is upgrading its facilities at JFK, where it completed a $743 million terminal in 2008. This summer it plans to start building international gates there.

The new investments and competition in New York add up to good news for consumers.

Blake Fleetwood, president of CookTravel.net, an online travel agency, noted that in recent years, Delta has offered competitive fares to Europe as it seeks to gain a foothold in New York.

Fleetwood recently flew out of LaGuardia to Richmond, Virginia, on a new route Delta added in late March.

“Before, I was trekking out to Newark or JFK” for that flight,” Fleetwood said. Delta “is going to swing a lot of business travelers over to their new service.”

(Editing by Patricia Kranz and Prudence Crowther)

(Reuters) – The Securities & Exchange Commission quizzed Facebook Inc on the impact of growth in mobile users in the months leading up to the social network’s initial public offering, letters released on Friday by the regulator show.

“Assuming that the trend towards mobile continues and your mobile monetization efforts are unsuccessful, ensure that your disclosure fully addresses the potential consequences to your revenue and financial results rather than just stating that they ‘may be negatively affected,'” the SEC wrote in a February 28 letter to Facebook Chief Financial Officer David Ebersman.

In another letter to Ebersman dated March 22, the SEC asked whether Facebook’s mobile monthly average users, or MAUs, were increasing in regions where the use of PCs was less prevalent.

Facebook responded by changing some of its disclosures in amended IPO filings.

In a March 27 letter to the SEC from Facebook’s lawyers at Fenwick & West, the company said it updated disclosures to include information on countries where it experienced the most significant growth in mobile MAUs.

However, Facebook also noted that it had seen growth in mobile MAUs in countries where PC use was prevalent, such as the United States, as well as countries where PCs are not so popular, such as Mexico.

This back and forth between the SEC and companies is typical during big IPOs.

“We responded to all SEC comments over the course of this correspondence and the SEC declared our registration statement effective on May 17,” a Facebook spokesman said on Friday.

However, the growth of mobile Facebook users became a big issue toward the end of the IPO process. On May 9, the company updated its IPO filing to warn that advertising growth was not keeping up with user growth in the second quarter, as more people accessed the social network through mobile devices.

That additional disclosure was not in response to SEC questions. Instead, Facebook had seen a continuation of the mobile trend during the first month or so of the second quarter and decided to update investors.

The amended May 9 IPO filing triggered estimate cuts by analysts at the banks underwriting the IPO, putting a financial and legal cloud over the offering.

(Reporting By Alistair Barr and Sarah McBride in San Francisco; editing by Andre Grenon)

(Reuters) – Wall Street extended gains in late afternoon trade on Friday on hopes of collective action from global central bankers if the closely watched election in Greece this weekend results in market turmoil.

The Dow Jones industrial average .DJI was up 94.90 points, or 0.75 percent, at 12,746.81. The Standard & Poor’s 500 Index .SPX was up 10.80 points, or 0.81 percent, at 1,339.90. The Nasdaq Composite Index.IXIC was up 30.49 points, or 1.07 percent, at 2,866.82.

(Reporting By Angela Moon, editing by Dave Zimmerman)

(Reuters) – Venture-capital firm Kleiner Perkins Caufield & Byers asked a California state court on Wednesday to dismiss a discrimination lawsuit by partner Ellen Pao, saying it denied “each and every material allegation” made by her.

The suit has become the talk of Silicon Valley, where the digerati are avidly debating its merits — along with broader questions about sexism in the technology industry.

In contrast to Pao’s suit, which described the firm as a place where women were labeled “buzz kills,” the response by Kleiner paints a picture of an underperforming partner who never told the firm she was unhappy with her treatment by male partners.

The seven-page response hit back at some of the more salacious claims Pao made in her suit, filed last month. Among them: that the firm gave male-only dinners, and that a managing partner encouraged Pao to marry another partner she believed was harassing her.

But the response didn’t go into details on some of Pao’s other complaints, including that women got smaller shares of profits at the firm, and that female junior partners got fewer board seats compared to male partners.

A lawyer for Pao didn’t immediately respond to a request for comment.

The firm said Pao didn’t complain about the alleged harassment from anytime between 2007, two years after she was hired, until “late 2011/early 2012.”

In her suit, Pao had said she raised concerns several times about her treatment by partner Ajit Nazre, including in 2007, in 2008, and 2009. She said she spoke to Kleiner’s head of human resources, Juliet de Baubigny; partners such as John Doerr and Ted Schlein; and the firm’s outside human-resources consultant.

The firm also provided glimpses of Pao’s performance, saying her reviews in 2009, 2010 and 2011 contained both positive and negative feedback. The firm didn’t go into the positives, but said one review described her as self-entitled and territorial; another encouraged Pao to provide more “thought leadership.”

Pao “did not advance to more senior positions at KPCB as a result of performance flaws identified in her review and other performance issues,” Kleiner’s response states.

In her suit, Pao said that Kleiner failed to promote women “comparably to men.”

In response to her allegation that partner Ray Lane downplayed Pao’s concerns after Nazre had pressured her to have sex with him and then retaliated when she broke off the relationship, Kleiner said Lane supported Pao’s decision to break off the relationship.

Pao’s assertion that Lane suggested she marry Nazre, who left the firm earlier this year, wasn’t true, Kleiner said.

Kleiner confirmed that another partner, Randy Komisar, gave Pao a copy of Leonard Cohen’s “The Book of Longing,” a book Pao’s suit described as containing sexual drawings and poetry. But Kleiner said Komisar gave her the gift only after she had given him a book and a Buddha statue.

Pao, who is still working at Kleiner, is on the boards of green-materials company Lehigh Technologies, analytics company Datameer and social-news company Flipboard. Before joining Kleiner, she worked at business-software company BEA Systems and phone-applications company Tellme Networks.

Kleiner Perkins, founded in 1972, has backed firms including online retailer Amazon.com Inc, gaming company Electronic Arts Inc, biotechnology company Genentech, browser company Netscape, information-technology company Sun Microsystems, and gaming company Zynga Inc.

Its latest fund, the $525 million Kleiner XV, has 10 managing partners, including Chien, Doerr, and Komisar. It also includes just one female managing partner, life-sciences specialist Beth Seidenberg.

Overall, the firm has 49 partners, of whom 12 are women.

(Reporting By Sarah McBride; Editing by Ed Lane)

(Reuters) – The top executive of US Airways Group Inc (LCC.N) sought to bolster shareholder support on Thursday for a proposed merger with bankrupt American Airlines, saying the financial community already likes the idea and that the two airlines would make a strong combination.

Speaking at the No. 5 U.S. airline’s annual shareholder meeting in New York, Chairman and CEO Doug Parker said a tie-up with American would create “an airline that can compete with anyone, that can be the best airline in the world.” The meeting was broadcast over the Internet.

US Airways disclosed its interest in merging with American in January. American’s parent, AMR Corp (AAMRQ.PK), filed for bankruptcy protection in November of last year.

Earlier this week, sources told Reuters that US Airways is hoping to file financial documents with U.S. antitrust regulators as early as July for the proposed merger with AMR Corp.

Parker also said on Thursday that a merger would make the combined carrier much stronger in areas where both are currently weak. He added that US Airways’ stock price, which has more than doubled this year, has been aided by financial community support for the proposed merger.

Shares of US Airways were up 3.3 percent at $12.37 on Thursday morning on the New York Stock Exchange.

Parker said American had lost market share in certain areas of the United States “because they’ve sat out consolidation.” He said mergers have helped airlines become more profitable in recent years.

Parker said US Airways understands that American has a fiduciary duty to explore various merger scenarios. He said his company understands that process is to start after a ruling, expected by June 22, in the court process currently under way in which American is seeking permission to throw out collective bargaining agreements.

Since expressing its interest in acquiring American, US Airways’ plan has won the backing of three unions that represent American’s ramp workers, pilots and flight attendants.

(Reporting by Karen Jacobs in Atlanta; editing by Matthew Lewis)

(Reuters) – New claims for state jobless benefits rose for the fifth time in six weeks and consumer prices fell in May, opening the door wider for the U.S. Federal Reserve to help an economy that shows signs of weakening.

Though the increase was small, it undermined hopes that a recent slowdown in hiring would prove temporary.

“There is very little sign of life,” said Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany, New York. “The economy as measured by employment conditions has slowed and there doesn’t appear to be any change when you look at the claims numbers.”

New claims rose by 6,000 last week, the Labor Department said on Thursday, and have been trending higher since February, which may have marked a turning point for the U.S. economy. Every month since February, employers have cut back on new hiring.

The slackening U.S. recovery and a worsening debt crisis in Europe have increased expectations of a further easing of monetary policy by the Fed, although economists are divided on whether the central bank will act when it holds its next policy meeting on Tuesday and Wednesday.

Prices for U.S. government debt fell following the publication of the data.

FALLING PRICES

In a sign the Fed could have more maneuvering room at that meeting, consumer prices dropped 0.3 percent last month, the sharpest decline since December 2008.

Holding back inflation last month, U.S. gasoline prices fell 6.8 percent, the most in more than three years, the Labor Department said.

The reason for the decline appears to be Europe’s debt crisis, which menaces the global economy and has pushed world oil prices lower.

That amounts to something of a silver lining for the wider economy because it suggests consumers could have a little more money to spend on other things. It also brightens President Barack Obama’s chances of reelection in November. The president will make his case on the economy at a campaign speech on Thursday in the battleground state of Ohio.

Still, outside the volatile food and energy category, inflation pressure appeared more steady. These so-called core prices climbed 0.2 percent, matching the prior month’s increase.

Stickiness in the core reading could give pause to some Fed policymakers as the central bank considers possible measures to help the economy.

But the overall tenor of recent economic data has been gloomy and Fed Chairman Ben Bernanke said last week the main question for policymakers right now is whether the economic recovery will move forward swiftly enough to keep the labor market on an improving path.

Recent signs have been worrisome. For example, retail sales contracted last month despite the drop in gasoline prices.

“Pressure is mounting on the Fed to give the economy a shot in the arm,” said Chris Williamson, an economist at Markit.

A combination of the worsening debt crisis in Europe and uncertainty over whether Congress will manage to stave off the scheduled expiration of various lower tax rates at year-end, dubbed the “fiscal cliff,” is souring business and consumer confidence.

On Thursday there were signs Europe’s woes were getting worse, as Spain’s 10-year bond yields hit a euro-era record of 7 percent. Yields above that rate have forced other struggling euro-area nations to seek an international bailout.

U.S. stocks rose in a volatile session on Thursday. Major indexes have swung wildly throughout each day this week, as investors remain concerned over Greek elections scheduled for Sunday.

A victory by parties in Greece opposed to austerity attached to its second bailout will send the euro zone further into crisis by pushing the country towards the currency bloc’s exit door. Policymakers around the world are preparing to protect their currencies and economies from any turmoil that might arise.

(Additional reporting by Lucia Mutikani in Washington and Angela Moon in New York; Editing byPadraic Cassidy and Neil Stempleman)