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(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)