Jobless Claims Surge To 26-Year High

WASHINGTON — A series of gloomy economic reports Wednesday showed consumers holding tight to their wallets with job losses expected to mount in the months ahead.

There was one glimmer of good news, however. Lower gas prices and widespread holiday discounts are giving consumers greater buying power. Consumer spending, when adjusted for those price drops, rose last month after five months of declines, the Commerce Department said.

Late Wednesday, the Federal Reserve granted a request by the financing arm of General Motors to tap the government's $700 billion rescue fund, bolstering GM's ability to survive.

The Fed said it had approved GMAC Financial Services' request to become a bank holding company. That designation makes GMAC eligible to receive a portion of the bailout fund and get emergency loans directly from the Fed.

Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down.

Even though consumer spending, adjusted for inflation, rose in November, economists don't expect consumers to ramp up spending anytime soon. In part, that's because companies in a wide range of sectors have been laying off workers.

November's inflation-adjusted increase in spending is "a temporary, one-month aberration in the downward trend of consumption," said Brian Fabbri, chief economist at BNP Paribas.

Without adjusting for inflation, the Commerce Department said consumer spending fell by 0.6 percent in November, the fifth straight month of decline.

Story continues below

advertisement

Separately, the Labor Department said the number of Americans who filed initial claims for unemployment benefits rose to the highest level in 26 years, though the labor force has grown by about half since then.

New claims for jobless benefits jumped to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week.

A Labor Department analyst said auto-related layoffs were a key factor behind the rise in jobless claims. The four-week average of initial claims, which smooths out fluctuations, rose to 558,000. That's the highest since December 1982, when the economy was emerging from a steep recession.

The elevated level of new jobless applications is one of several signs that the labor market has deteriorated fast in recent months. The Labor Department said earlier this month that employers cut a net total of 533,000 jobs in November, sending the unemployment rate to 6.7 percent, highest in 15 years.

The financial markets took the news in stride. The Dow Jones industrial average closed up nearly 49 points, to about 8,468.

The economy has been mired in recession since last December, dragged down by declining home prices and clogged credit markets. Consumers have lost trillions of dollars in household wealth as the stock markets and home prices have sunk this year.

In another report released Wednesday, the Commerce Department said orders for large manufactured goods dropped by 1 percent, less than the 3 percent economists had expected.

The November decline was led by a huge drop in orders for aircraft and a smaller drop in autos. Excluding the big decline in transportation, total orders rose 1.2 percent in November, the best showing since June.

Mass layoffs are taking place in a wide range of industries. Industrial conglomerate Textron Inc. on Tuesday said it has cut 2,200 jobs, while technology services provider Unisys Corp. said Monday it will eliminate 1,300 jobs. Sovereign Bancorp Inc.'s bank unit said last week it is laying off 1,000 employees.

In the meantime, federal regulators are moving to sell the remnants of failed IndyMac Bank before year end, mopping up from the second-largest bank failure this year.

It was unclear Wednesday whether the government would sell off IndyMac as a whole or in pieces. The Pasadena, Calif-based lender, which specialized in loans made with little down payment or proof of assets, failed in July as the U.S. housing market bubble collapsed.

Rates on 30-year fixed-rate mortgages fell to a record low for the second straight week, causing refinancing applications to surge to the highest level in more than five years, a month after the Federal Reserve pledged to channel billions to prop up the sinking U.S. housing market.

Freddie Mac, the mortgage company, reported Wednesday that average rates on 30-year fixed-rate mortgages dropped to 5.14 percent this week, down from the previous record of 5.19 percent, set last week. The rate was the lowest since Freddie Mac's weekly mortgage rate survey began in April 1971 and the eighth straight week of declines.

___

AP Business Writers Martin Crutsinger and Alan Zibel contributed to this report.

Comments

[gcallaghan]

With Christmas already behind us...get ready...

We're gonna party like it's 1929

[CologneCitizen]

Statistics lie a great deal. The unemployment rate in the US is higher than reported. What about the people who find a job at a fast food place instead of their good one before, what about the people who don't bother to search anymore, etc. Our statistics in Germany are not accurate as well. You can easily add 4 to 6 % on the figures. Like women who lost a job and intend to stay at home, or people who are in qualifying courses are never counted in the total numbers.

There is a saying in Germany: Never trust statistics you haven't forged yourself.

[Raster]

Breathless-that's what we'll be when the bankruptcies and job losses start rolling in next week on 01/01/1932, oh sorry, I meant 01/01/2009.

[swift goat pet for truth]

ANOTHER record for Bush!

The man is just awesome.

[planetjeffy]

Look for double digit unemployment, 11 to 14 percent. Many companies are waiting til after Xmas to cut workers. Also, many retailers, restaurants, car dealers and other businesses will go belly up after the holidays, throwing their workers on the streets. Get used to many stories like this one.

[4TJefferson]

In another couple of months the unemployment rate should be near the 70 year high. Will someone please arrest some of these "so-called bankers" on Wall Street? How about using the R.I.C.O. statutes?

[Amennyc]

they can't even get Rove to show up with a summons. LOL. or deal with a Vice President openly bragging about torture and a war of lies. just shut up and work to pay taxes so they can get richer.

[Balancement]

``Are there no prisons?'' asked Bush/Cheney.
``Plenty of prisons,'' said the gentleman.
``And the Union workhouses?'' demanded Bush/Cheney. ``Are they still in operation?''
``They are. Still,'' returned the gentleman, `` I wish I could say they were not.''
``The Treadmill and the Poor Law are in full vigour, then?'' said Bush/Cheney.
``Both very busy, sir.''
``Oh! I was afraid, from what you said at first, that something had occurred to stop them in their useful course,'' said Bush/Cheney. ``I'm very glad to hear it.''
``A few of us are endeavouring to raise a fund to buy the Poor some meat and drink, and means of warmth. We choose this time, because it is a time, of all others, when Want is keenly felt, and Abundance rejoices. What shall I put you down for?''
``Nothing!'' Bush/Cheney replied.
``You wish to be anonymous?''
``I wish to be left alone,'' said Bush/Cheney. ``Since you ask me what I wish, gentlemen, that is my answer. I can't afford to make idle people merry. I help to support the establishments I have mentioned: they cost enough: and those who are badly off must go there.''
``Many can't go there; and many would rather die.''
``If they would rather die,'' said Bush/Cheney, ``they had better do it, and decrease the surplus population."

[mauibob]

Now that bush has given the Automakers the first installment of the bailout, here is the UAW's response to the demand that the auto companies negotiate the wages to be in line with other automanufacturers: F... You the taxpayers!

Washington Post 12/24/2008

The nation's automakers are preparing to ask for wage and benefits concessions from their workers in early January to meet the conditions of a $17.4 billion federal aid package, but labor officials say they will seek to renegotiate the terms of the bailout rather than make those sacrifices.

The remarks by union leaders have set up yet another contentious battle in the auto industry.

In agreeing to provide federal assistance to General Motors and Chrysler, the White House demanded the firms cut worker compensation to the levels paid at the U.S. divisions of Toyota, Nissan and Honda. But Ron Gettelfinger, president of the United Auto Workers, said earlier this week that he would seek to remove the wage-reduction provision of the loan, calling it "an undue tax on the workers" who have already made "major" sacrifices for the benefit of the auto industry.

Gettelfinger said that what is being asked of the autoworkers -- who agreed to concessions in 2003, 2005 and 2007 -- is "unrealistic." He has said he wants to work with President-elect Barack Obama to remove the wage provision.


http://www.washingtonpost.com/wp-dyn/content/article/2008/12/23/AR2008122302475_pf.html

Bush you are an idiot.

[cdub1991]

The administration adds loopholes to the TARP to allow executives to continue getting their big salaries and bonus, but when it comes to the working man--no--they are the problem and every last penny must be extracted from them. It's all their fault, even though they don't plan the product lines or manage the research and development budgets or almost anything.

The unions probably will end up having to give up something in this process, but for the White House to try to impose their vision of the endgame is an inappropriate level of micro-management by a president whose judgment is horrific at best. The details should be left to GM and Chrysler's managements to work out with their unions. If they can't do it given the crisis they are in--at that point--they probably deserve to fail, as problematic at that might be. Bush certainly isn't smart enough to solve their problems for them, however.

When are people going to figure out that the stagnation/decline of the middle class began with the breaking of the air traffic controls union back in the eighties? Unions created and defended most of the benefits we take for granted. It was union negotiated salaries that created the homes that allowed parents to send their kids off to college and better their lives. The middle-class has been in a downward slide ever since the age of Reagan, but everyone just keeps pounding the table shouting kill the unions.

[mauibob]

If what you are saying is that since both the companies and the UAw negotiated their contracts "in good faith" and think it is a good deal, then let the chips fall where they may, then I agree. But to expect me, a taxpayer, to pay for a bad agreement and just hand over billions with no conditions is outrageous. If the unions think their wages are fair, then by all means travel down that path, but dont come begging the taxpayers for money with no strings attached. The financials gave up a lot. The governemnt now owns a good poertion of them and has to pay interest on loans. CEO's were required to give items up and stockholders have had their dividends curtailed. The UAW has done nothing since asking for the bailout. I for one will never buy a UAW made car again. They got all the money from me they will ever get.

[Amennyc]

Who? Sorry why is this even a news story??? Those people are the worker "bees". My government tells me that I only need to be concerned with top CEO's, executives, etc.., With out them this country is over. I know it was the farmer and the simple laborer that got things started way back when. But that was then. Its all about corporate jets, bonuses, and spa retreats. Thats what keeps us going. The worker "bees" contribute little and there are plenty of other less educated to know the difference and replace the malcontent.. Now if these people had a voice or a concern, then maybe I would bat an eye. But they seem happy and content with the scraps that all from the top. As long as I keep giving them an inch and a Wa Mart, they will keep quiet. They actually think being humble and saving will help! LOL. Yea, help them pay their taxes so I can get more. jejeje... Now tell me, why is this a news story? When those affected the most don't seem to care themselves. Now the immigrants. They care. If some law tries to get passed against them, I see hundreds and thousands in the streets protesting. ANd they are not even citizens! Seems to work for them. But the workers, please.... give me a break by giving the true heros of the country a break. The worker "bees' need to just shut up and deal.

[learnsomething]

Bush sure did a number of this country. The worse Adm in US history.

Thanks to all of those who were complicit in this "American tragedy known as the Bush/Cheney Adm". Those who voted for them, not once but twice, which gave them the thin margin to steal. It is easy to steal close election.

[DIAGUY]

Not even close !!! Jimmy Carter was a MUCH bigger disaster. I'm still reeling from those four years of hell.

[juanjo]

You must be dizzy from spinning all the facts you need to, to make the comments you do. First you are reeling from "those four years of hell" then you are "still laughing to this day" from the Reagan years. Carter was not the world's greatest president but it was not for a lack of trying. For all his faults Carter was a fiscal conservative compared to Reagan who spent money like a drunken sailor on leave.

[whosyourdaddy]

Oddly enough, I've noticed that none of you are complaining of being jobless.

[cdub1991]

That's because we're all on line at work.

Actually, you make a good point. It's what Obama means when he says things will get worse before they get better because, so far, the layoffs are probably somewhat sector specific. I can say that I work in a service industry and many of our bid requests have been on hold, so my fingers are crossed for next year.

The real trouble starts if large numbers of major business concerns start closing their doors and the loss starts rippling through communities. We aren't there yet--I don't think. There's probably more doom and gloom expressed by some folks here then is actually warranted.

[whosyourdaddy]

Agreed. It has become in some circles, a masochistic pleasure to put the most negative possible interpretation on all things American. I suspect there will be a remarkable change of heart come Jan 21. Perhaps even a new found propensity to perceive the worst possible circumstances as far less severe and perhaps even the fault of others.
Our economy is taking a pretty harsh beating, however, this has happened approximately every ten years for a very long time. The problem is there is a significant part of the population that hasn't experienced this sort of thing and lacks perspective.
A week ago I mentioned the Dot.com collapse and few on the thread had any clue what the hell I was talking about.

[Balancement]

I sorta mentioned that on a previous page--but I know it's too much work for you to check earlier posts--perhaps you could get your maid to do that for you.

[whosyourdaddy]

Thanks, I'll put her on that right away.

[Jewkie]

Since 1982. Hmmm...let's see...Reagan had been in office since 1980...

[cdub1991]

All hail the Laffer Curve...or the Laughable curve, as I use call it.

[DIAGUY]

You can "laugh" all you want. Those were the greatest economic times this country has ever known, even complete morans made money. I'm still 'laughing' to this day because of that very short but very sweet 8 years.

[freethinking moderate]

"The fundamentals of our economy our sound." - 2008 GOP


Its just a fact that can be denied, but never negated - This neo-Feudalistic economic religion was always destined to be a failure. It was only via the self-righteous theocrats, who thought that since their religious mythology was true that everything else they thought was true and unquestionable, that this economic authortarianism ever saw the light of day. Successful countries are nationalistic. This is the nature of reality. Trying to impose a failed dogmatic economic religion onto it to yield to your delusions will not, as now has been thoroughly demonstrated, prove successful.

Libertarianism is just a fancy word for Feudalism.

[rkimball]

the jobless rates have not caught up to the economic conditions yet. this is just the beginning.

[IllinoisTexan43]

Can we charge the Yale and Harvard MBA programs with ANY crime? I mean, they churn out these rock star CEOs, COOs and hedge fund managers who, in turn, go forth and plunder with no conscience whatsoever. The end result is just absolute greed and avarice and the middle class has the burden fall on them.