Jobless claims jump to record, durable orders slide
WASHINGTON (Reuters) - The number of Americans claiming jobless benefits hit a record high in mid-January, while orders for long-lasting factory goods fell for a fifth month in December, according to data on Thursday that showed the economy in steep decline.
Piling on the gloom for an economy mired in recession for more than a year, sales of newly built single-family homes slumped to their lowest levels since records started in 1963.
The batch of bleak data cast doubt on whether the economy would begin to recover in the second half of the year, since stability in the housing market, the root of the worst financial crisis in more than 70 years, may be a prerequisite.
It also underlined the urgency of efforts by the Obama administration to rush a stimulus plan totaling $825 billion or more through Congress.
"I don't think we are going to see a recovery until 2010. It's possible the economy can bottom sometime in the fall or the winter, but it will be pretty rough sailing ahead, especially for the next quarter or two," said Michael Darda, chief economist at MKM Partners in Greenwich Connecticut.
The number of people staying on state jobless benefits rolls after drawing an initial week of aid jumped 159,000 to a higher-than-forecast 4.78 million in the week ended January 17, the most recent week for which data is available.
It was the highest reading on records dating to 1967.
"Never before have we seen so many people rely on their unemployment checks to help them pay for food and shelter. The message here is clear: Businesses are now in survival mode," said Bernard Baumohl, chief global economist at The Economic Outlook Group in Princeton, New Jersey.
Initial claims for unemployment insurance rose to 588,000 last week, up marginally from a week earlier.
U.S. stocks fell on the data, snapping a four-day winning streak. The Dow Jones industrial average ended down 226.44 points at 8,149.01. Government bond prices were weighed down by supply worries related to efforts underway in Washington to help the economy and a fractured banking system.
The harsh economic climate is forcing companies to lay off workers in huge numbers, further curbing demand by households already reeling from the fall in their net worth as a result of the housing and stock market crash.
New orders for long-lasting manufactured goods dropped 2.6 percent last month after plunging 3.7 percent in November, the Commerce Department said. Analysts had expected a December decline of only 2 percent.
For 2008 as a whole, orders tumbled 5.7 percent, the second biggest decline since 2001.
The report showed businesses were sharply ratcheting back their investment plans. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 2.8 percent in December, while November's figures were revised sharply lower.
"Overall we don't see much relief (for the economy) until much later this year. We are passing through the darkest part of the storm right now," Tim Quinlan, economic analyst at Wachovia Securities in Charlotte, North Carolina.
On Wednesday, the Federal Reserve said it expected the economy to gradually start recovering later this year, but cautioned the downside risks to that outlook were significant.
It left its target range for overnight interest rates at zero to 0.25 percent, but said it was prepared to buy long-term U.S. government debt if warranted to battle the credit crisis.
In a separate report on Thursday, the Commerce Department said new home sales tumbled to a 331,000 unit annual pace, the lowest since it started keeping records in 1963. November's sales were revised down to a 388,000 rate from a previously reported 407,000.
For 2008, sales totaled 482,000, the lowest since 1982 and down a record 37.9 percent from the prior year.
"Even with the recovery in 2010, this will be longest recession since the Depression and it will probably be the deepest," said MKM Partners' Darda. Darda cautioned, however, against drawing parallels to the 1930s, where the dropoff in activity much larger.
A report on U.S. gross domestic product on Friday is expected to show the economy contracted by at least a 5.4 percent annual rate in the fourth quarter, the worst since the first quarter of 1982.