WASHINGTON (Feb. 26) - As bad as it is already, the economy keeps getting worse — and government figures Thursday provided more evidence that the downward spiral won't end anytime soon.
The number of Americans seeking unemployment benefits topped 5 million for the first time since record-keeping began in 1967. And the number of first-time claims hit 667,000, the highest level in more than a quarter-century. Both figures were worse than experts expected.
Orders for cars, computers, machinery and other durable goods plunged a larger-than-expected 5.2 percent in January as global economic troubles reduced demand from customers at home and abroad.
"We have been looking for signs that the economy's rate of decline might be slowing, but can't find any," said Nigel Gault, chief U.S. economist at the IHS Global Insight consulting firm.
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The government reports offered more evidence that consumers are scaling back purchases as jobs vanish, home prices drop and stock portfolios shrink. Those factors fuel more job and spending cuts by profit-starved businesses.
"The hope is that policy efforts by the federal government will be able to break that cycle," said Zach Pandl, an economist at Nomura Securities International. "But it's still going to take some time before that happens."
President Barack Obama's $787 billion stimulus package, for example, includes billions of dollars of infrastructure spending, but most of the impact will not be felt until 2010 or later, Pandl said.
The Obama administration forecast Thursday that the budget deficit will hit $1.75 trillion this year, reflecting the massive spending being undertaken to battle the severe recession and the worst financial crisis in seven decades.
Initial jobless claims jumped to 667,000 last week, the Labor Department said, from the previous week's figure of 631,000. Analysts had expected a slight drop in claims, which are now at the highest level since October 1982, though the work force has grown by about half since then.
The four-week average of initial claims, which smooths out fluctuations, rose to 639,000, the highest in more than 26 years.
And the number of people claiming benefits for more than one week reached 5.1 million, the highest total on records dating back to 1967 and the fifth straight week that continuing claims have reached a new high.
JPMorgan Chase & Co. added to the bad news Thursday, saying that it would eliminate about 12,000 jobs as it absorbs the operations of failed savings and loan Washington Mutual Inc. That figure includes 9,200 cuts announced previously and 2,800 jobs expected to be lost through attrition.
Besides cutting jobs, companies are reducing their orders for new equipment. The Commerce Department's latest report on U.S. factory activity showed orders falling for a record sixth straight month. The previous record of four straight monthly declines came in 1992.
The weakness in January was widespread, with orders for cars, metal products, machinery, computers and electrical equipment, and household appliances all posting declines.
A third report Thursday showed that new home sales tumbled 10.2 percent to a seasonally adjusted annual rate of 309,000 last month, the worst showing on government records going back to 1963.
The median sales price fell to $201,100 in January, a record 9.9 percent drop from the previous month. The median price is the midpoint, where half of homes sell for more and half for less. But even lower prices and low mortgage rates have not eased the housing slump.
The stock markets ended an erratic session lower. The Dow Jones industrial average lost nearly 89 points, while broader indices also fell slightly.
The negative data means the economy probably shrank at the end of last year by more than the government has previously estimated, economists said, and the first quarter of this year could be worse.
The Commerce Department on Friday will release a revised estimate of U.S. gross domestic product in last year's fourth quarter. Wall Street economists expect the government will report the economy shrank 5.4 percent in the October-December quarter, even worse than its initial estimate of a 3.8 percent drop.
That would be the steepest drop since a 6.4 percent decline in the first quarter of 1982. GDP measures the value of all goods and services produced within the U.S. and is the broadest measure of the economy's health.
The labor market has deteriorated rapidly in recent months. Employers cut a net total of nearly 600,000 jobs in January, the highest monthly tally since 1974, pushing up the unemployment rate to 7.6 percent.
Given the jump in unemployment claims last week, JPMorgan economists expect payrolls will fall by at least 650,000 and unemployment will reach 8 percent in February and 10 percent by the end of this year.
The record number of continuing jobless claims shows many newly laid-off workers are having difficulty finding jobs. An additional 1.4 million people were receiving benefits under an extended unemployment compensation program approved by Congress last year, as of Feb. 7, the latest data available. That brings the total number of jobless benefit recipients to roughly 6.5 million.
Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. A year ago, initial claims stood at about 359,000.
AP Economics Writer Jeannine Aversa contributed to this report.
