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New Jobless Benefit Claims Unchanged At 505K

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WASHINGTON — A gauge of future economic activity and a report on unemployment benefits signaled Thursday that the recovery likely will remain weak in the coming months.

The Conference Board's index of leading economic indicators rose less in October than analysts had expected. The index forecasts activity by measuring consumer expectations, building permits and other data.

And the number of newly laid-off workers seeking unemployment benefits, unchanged last week, remains above the level that would indicate the economy is adding jobs.

Together, the two reports suggested that the lack of job creation is dampening consumer expectations and prospects for an economic rebound. Uneasy consumers likely will curtail their spending, which powers about 70 percent of the U.S. economy.

New jobless claims have fallen about 22 percent since spring. But companies' reluctance to hire is weighing down the housing market – and the economy's fledgling recovery.

A separate report Thursday found that a rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure.

Driven by rising unemployment, such loans accounted for nearly 33 percent of new foreclosures last quarter. That compares with just 21 percent a year ago, when high-risk subprime loans made during the housing boom were the main reason for default.

And the proportion of homeowners with a mortgage who were either behind on their payments or in foreclosure hit a record high for the ninth straight quarter, the Mortgage Bankers Association reported.

The latest data on the economy gave investors little incentive to hold on to stocks. Major indexes tumbled about 1.5 percent Thursday, including the Dow Jones industrials, which fell about 135 points.

The Labor Department's report on jobless benefits said first-time claims amounted to a seasonally adjusted 505,000 last week. That was the same as the previous week's revised figure, and it matched analysts' expectations. A year ago, there were 533,000 initial claims.

The four-week average, which smooths out volatility, fell for the 11th straight week to 514,000, the lowest level in nearly a year.

Some economists said the report was at least an encouraging sign that job losses in November will decline from last month's total. Employers cut a net total of 190,000 jobs in October, down from 219,000 the previous month.

Economists at Deutsche Bank are forecasting that net job losses will fall to 125,000 in November. But the economy needs to add about 125,000 jobs a month just to keep the unemployment rate from rising.

Separately, the Conference Board said its index of leading economic indicators rose 0.3 percent last month, indicating a slow, bumpy recovery next year. A gauge of consumer expectations, which are dropping as unemployment continues to rise, weighed down the index.

While the steady decline in claims is evidence that firings are decreasing, most economists say weekly claims would have to fall to about 425,000 for several weeks to signal that the economy is actually adding jobs. Some economists put the number higher, around 475,000.

Even as claims are falling and the economy has started growing, the unemployment rate is rising. It jumped to 10.2 percent in October from 9.8 percent, the highest level in more than 26 years, the government said earlier this month.

The economy grew at a 3.5 percent annual rate in the July-September quarter, the government said last month. But many economists expect growth to slow in the current quarter. Recent reports on industrial production and housing have been disappointing.

The number of people continuing to claim benefits, meanwhile, dropped by 39,000 to 5.6 million for the week ending Nov. 7, the department said. The figures on continuing claims lag behind initial claims by a week.

But the continuing claims figure does not include millions of people that have used up the regular 26 weeks of benefits typically provided by states. They are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

Nearly 4.2 million people were receiving extended benefits in the week ended Oct. 31, an increase of 120,000 from the previous week.

Congress added 14 to 20 weeks to the extended program Nov. 6, the fourth extension since the recession began and the longest total extension on record. That boosted the total number of weeks a person could collect unemployment to as much as 99 in the hardest-hit states.

But more than 1 million people will run out of unemployment benefits in January unless Congress quickly extends federal emergency aid, a nonprofit group said Wednesday. The November extension didn't address an underlying problem: The emergency unemployment compensation program, including all additional weeks, expires at the end of this year.

Some employers are continuing to lay off workers. In a securities filing Thursday, AOL said it plans to cut about a third of its work force once it is spun off from the media conglomerate Time Warner Inc. That would amount to nearly 2,300 workers at the struggling Internet company.

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AP Real Estate Writer Alan Zibel in Washington contributed to this report.