Jobless Claims Hit 588,000; Durables Drop 2.6%

Jobless rolls jumped to a record peak in mid-January, while new orders for durable goods fell for a fifth straight month in December, data showed on Thursday, underscoring the deepening economic malaise.

AP

The latest batch of grim data fanned worries that the year-long recession, triggered by the collapse of the U.S. housing market, could be the worst economic slump since the Great Depression of the 1930s.

The number of people remaining on the benefits roll after drawing an initial week of aid, or continued claims, rose 159,000 to a higher-than-forecast 4.776 million in the week ended Jan. 17, the most recent week for which data is available.

The Labor Department said this was the highest reading since its records on this series began in 1967. Analysts had expected continued claims to be 4.65 million.

Initial claims for state unemployment insurance benefits increased to a seasonally adjusted 588,000 last week from a revised 585,000 the prior week. Analysts polled by Reuters had forecast 580,000 new claims versus a previously reported count of 589,000 the week before.

"These are weak numbers, showing the recession continues to drag and is even intensifying," said Andrew Bekoff, chief investment officer at LPB Capital in Doylestown, Pa. "The bigger story will be tomorrow's reaction to fourth-quarter GDP results."

The Commerce Department is expected to report on Friday that gross domestic product, the broadest measure of the economy, contracted at an annual rate of 5.4 percent in the fourth quarter, according to a Reuters survey.

Stock futures added to losses after jobless claims and durable goods orders data. U.S. Treasury debt prices were little changed, while the dollar extended losses versus yen.

Dropping Durables

Highlighting the deepening malaise, new orders for long-lasting manufactured goods dropped 2.6 percent in December. Durable goods orders for November were revised to show a decline of 3.7 percent, the Commerce Department said.

For 2008, overall orders tumbled 5.7 percent, the second biggest decline since 2001, after rising 1.3 percent in 2007.

New orders excluding transportation dropped 3.6 percent in December, but transportation equipment rose 0.6 percent, while motor vehicles and parts plunged 5.2 percent.

With the year-long economic downturn showing no signs of reaching a bottom anytime soon, and the accompanying wave of layoffs also displaying no evidence of peaking, households have slashed spending on big-ticket items.

Video: Analyzing the Economic Numbers

The Federal Reserve left its target range for overnight interest rates at zero to 0.25 percent on Wednesday and said it was prepared to buy long-term U.S. government debt if warranted to improve market conditions.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 2.8 percent in December. The previous month was revised to show a 1.7 percent increase, from a 3.9 percent rise reported before.

Analysts polled by Reuters had expected overall orders to fall 2 percent in December, and ex-transportation to drop 2.7 percent.

Copyright 2009 Reuters. Click for restrictions.