U.S. economy sinks deeper as Dow, joblessness and home sales worsen worsendworsenorsen as economy skids more

WASHINGTON (AP) — Week by week, the numbers that measure the economy get worse, heading toward uncharted territory.

The Labor Department released figures Thursday showing that the percentage of the work force receiving unemployment benefits reached a 25-year high in mid-January. The raw numbers were the highest since the government started keeping records in 1967, although the work force was much smaller then.

Adding to the grim picture were separate government reports that showed December home sales plunged to their lowest rate since recording began in 1963. And orders for big-ticket manufactured goods dropped more than expected, capping the worst year for manufacturers since 2001.

But the jobless numbers were the worst — with more layoffs on the way.

The Labor Department reported Thursday that a seasonally adjusted 4.78 million Americans claimed unemployment insurance for the week ended Jan. 17. That’s an increase of 159,000 from the previous week and worse than economists’ expectations.

As a percentage of workers covered by unemployment insurance, the tally is the highest since August 1983.

The figures underscored how hard it is for laid-off workers to leave the unemployment rolls by finding a new job amid the deepening recession.

And the 4.78 million figure is deceptively low. It doesn’t include about 1.7 million people receiving benefits under an extended unemployment compensation program authorized by Congress last summer, meaning the total number of recipients is actually closer to 6.5 million.

That pushes the share of the work force receiving benefits to the highest level since December 1982, when the economy was recovering from a steep recession. Jobless benefits typically last 26 weeks, but Congress usually authorizes extensions during economic downturns.

More job cuts were announced Thursday. Cessna Aircraft Co., part of the Providence, R.I.-based conglomerate Textron Inc., said it plans to lay off 2,000 workers, on top of 2,600 cuts it announced earlier this month. Ford Motor Co. said its credit arm would cut 20 percent of its work force, or 1,200 jobs. Eastman Kodak Co. said it’s cutting 3,500 to 4,500 jobs, or 14 to 18 percent of its work force. Black & Decker Corp. and Bon-Ton Stores Inc. also announced layoffs.

Starbucks Corp., Time Warner Inc.’s AOL, Target Co., Boeing Co., Pfizer Inc., Home Depot Inc. and others have announced tens of thousands of job cuts this week alone, bringing layoffs announced in January to about 130,000, according to a tally by The Associated Press.

On the housing front, the Commerce Department said new-home sales fell 14.7 percent in December to a seasonally adjusted annual rate of 331,000, the lowest pace on records dating back to 1963. For 2008, builders sold 482,000 homes, the weakest results since 1982.

The median price of a new home sold last month was $206,500, a drop of 9.3 percent from a year ago. The median is the point where half the homes sold for more and half for less.

Meanwhile, new orders for durable goods dropped by 2.6 percent last month, even worse than the 2 percent decline economists expected. Orders fell 5.7 percent for the year, the second-biggest drop on government records, exceeded only by a 10.7 percent plunge in 2001, according to the Commerce Department.

The financial markets fell on the news. The Dow Jones industrial average sank 226 points, or 2.7 percent, while other indicators tumbled more than 3 percent. On Wednesday, stocks had soared on hopes that the government will take bad debt off banks’ books.

Government data due out Friday are expected to show the economy contracted at a rate of 5.4 percent in the final three months of last year, according to the consensus estimate of economists surveyed by Thomson Reuters. If they are correct, that would mark the worst performance since a drop of 6.4 percent in the first quarter of 1982.

The tally of Americans filing new jobless benefit claims rose slightly to a seasonally adjusted 588,000 last week, worse than analysts expected. That nearly matched a late December tally of 589,000, which was the largest in 26 years although the labor force grew by about half during that time.

Amy Wilson, 38, who lives in Whiting, Ind., has seen all types of companies reluctant to add workers. She’s applied for about 100 jobs since she was laid off from the Metal-Matic steel company in October. Other steelmakers with nearby plants, including Arcelor Mittal and U.S. Steel Corp., also laid off workers this fall.

She said she had also planned to apply for a job at a nearby refinery which planned to expand, but they put the project on hold as oil prices plummeted.

“I’m going for anything,” she said. “Pizza delivery, any kind of work, you name it.”

A year ago, continuing claims stood at about 2.7 million, less than half their current level when the extended unemployment program is included.

The unemployment rate, which hit a 16-year high of 7.2 percent in December, likely rose this month to 7.4 percent, according to a Thomson Reuters survey.

The crush of new and continuing claims has overwhelmed many states’ ability to process them all. Electronic filing systems crashed in three states earlier this month, and last week Michigan said it would hire 276 workers and open a fourth call center to handle increased phone traffic.

President Barack Obama’s $819 billion economic stimulus package, approved by the House on Wednesday and now on its way to the Senate, would provide $500 million to the states to upgrade their unemployment insurance systems. The measure also would continue the extended unemployment compensation program, which adds up to 33 weeks of benefits, until the end of the year.