WASHINGTON (Reuters) - The number of U.S. workers collecting jobless benefits hit a 26-year high last month, data showed on Thursday, and it may head higher as a deepening economic slump forces a broad spectrum of firms to cut jobs.
Contributing to the labor-market gloom, a host of U.S. companies announced large-scale layoffs, including top U.S. phone company AT&T Inc, which is eliminating 12,000 jobs, and chemical maker DuPont, which is cutting 2,500.
Leading U.S. retailers also reported dismal November sales on Thursday. Toting up the results, the International Council of Shopping Centers said sales fell by a record 2.7 percent compared to the same period last year.
Economists said the latest batch of dour news for the world’s largest economy, which fell into recession a year ago, pointed to a downturn that could be the sharpest and longest since the downswings in the early 1980s.
“It provides more signs that the recession is going to get a little bit deeper. The numbers today fit with the scenario that fourth quarter GDP is down probably in the neighborhood of four percent,” said Michael Strauss, managing director and senior economist at Commonfund in Connecticut.
“Typically what happens is when the recession gets deeper, we see deeper job cuts. We have seen some confirmation of that today, we will see some more confirmation of that in tomorrow’s employment report.”
In an effort to fight the recession, the U.S. Federal Reserve is expected to cut interest rates by a half-percentage point to an ultra-low 0.5 percent at a meeting on December 15-16. That would be the lowest on records dating to July 1954.
On Thursday, the European Central Bank and the central banks of Britain, New Zealand and Sweden all lowered rates sharply to try to battle deepening economic ills.
The U.S. Labor Department said the number of unemployed workers drawing benefits after claiming an initial week of aid jumped to 4.087 million in the week ended November 22, the highest since December 1982, from 3.998 million the prior week.
While first-time claims for benefits unexpectedly fell last week to 509,000 from 530,000, a four-week moving average of new claims, a better gauge of underlying labor trends, rose to 524,500, also a 26-year high.
The insured unemployment rate, a measure of the workforce receiving unemployment benefits, edged up to 3.1 percent in the week ended November 29 from 3 percent the prior week. This was the highest reading since September 1992.
The Dow Jones industrial average ended down 215 points, or 2.5 percent, at 8,376 on a profit-warning from drugmaker Merck and an slide in energy shares as oil prices fell to the lowest level in nearly four years .
However, the S&P Retail Index rose 1.5 percent as investors bet November’s weak sales signaled the bottom for U.S. stores.
Analysts said the data did not bode well for the U.S. government’s monthly report on employment due on Friday and reckon employers could have reduced payrolls by anything between 250,000 and 550,000 last month.
The consensus of economists polled by Reuters is for a drop of 340,000 in non-farm employment and a jump in the jobless rate to 6.8 percent from 6.5 percent in October.
“Our employment model is suggesting we will see a dreadful -475,000 non-farm payrolls print tomorrow, which will make it the biggest drop since May 1980,” said Brian Dolan, chief currency strategist at Forex.com in Bedmnister, New Jersey.
Less-comprehensive data on Wednesday showed U.S. private employers cut 250,000 jobs in November, the biggest drop in seven years, after eliminating 179,000 positions in October.
In another reminder of the dire economic situation, new orders received by U.S. factories plunged 5.1 percent in October, the third straight monthly decline and the biggest in eight years, a Commerce Department report showed.
“Basically we went from an ability to export with a vengeance to a rapid decline. Consumer and business investments are very weak. We are in recession and this confirms that,” said Kurt Karl, chief U.S. economist at Swiss Re in New York.
Additional reporting by Doug Palmer in Washington, Richard Leong in New York and Brad Dorfman in Chicago