WASHINGTON - The government says new claims for unemployment benefits increased more than expected last week as layoffs spread throughout the economy.
The Labor Department says initial requests for jobless benefits rose to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week. That's much more than the 560,000 economists had expected.
The number of initial claims is the highest since November 1982, though the work force has grown by about half since then.
In other economic news, durable goods orders fell a smaller-than-expected 1 percent in November as aircraft demand drops.
Also, consumer spending fell for a fifth straight month in November, the longest weak stretch in a half-century, while incomes declined under the weight of massive job layoffs.
The Commerce Department reported today that consumer spending fell by 0.6 percent last month, slightly smaller than the 0.7 percent drop that economists had expected.
Americans' incomes fell by a worse-than-expected 0.2 percent. It was the first decline since July and reflected in part the fact that more than a half-million jobs were cut in November as the recession deepened.
The 0.6 percent drop in consumer spending followed an even larger 1 percent fall in October. However, the steep plunge in gasoline prices, which is actually good news for consumers, made the declines look worse. Excluding price changes, consumer spending would have dropped by 0.5 percent in October and actually risen by 0.6 percent in November. The November increase excluding inflation was the best showing in more than three years.
Still, economists think the overall trend for consumer spending is down, given the problems facing the economy including the longest recession in a quarter century, a severe financial crisis that has cut off access to credit for millions of borrowers and a massive wave of job layoffs.
All of those troubles have left retailers braced for what could be their worst holiday shopping season in decades.
Economists don't think the hard times will end any time soon. The government reported Thursday that the overall economy, as measured by gross domestic product, was declining at an annual rate of 0.5 percent in the July-September quarter and analysts believe the contraction will accelerated in the current quarter. Some are forecasting that GDP will plunge at an annual rate of 6 percent, which would be the worst showing in 26 years.
Many analysts say GDP will also fall in the first and second quarters next year before beginning a modest rebound in the summer. If that forecast turns out to be accurate, it would make the current recession, which began in December 2007, the longest in the post World War II period.
The economic weakness is helping to keep inflation under control. A price gauge tied to consumer spending fell by a record 1.1 percent in November, the second monthly decline. Excluding the cost of energy and food, the price index was unchanged last month.
Over the last 12 months, consumer prices are up 1.4 percent, the smallest 12-month change since August 2002.
Economists closely watch consumer spending because it accounts for two-thirds of total economic growth. For the July-September quarter, the government reported Tuesday that spending had fallen by 3.8 percent, the biggest quarterly setback in 28 years.
Analysts say the fourth quarter could turn in an even worse performance, given that the recession has intensified. The economic problems facing households have translated into weak holiday shopping for retailers.
Michael P. Niemira, chief economist for the International Council of Shopping Centers, is forecasting that sales at established stores in November and December will be down 1.5 percent to 2 percent - making this the weakest holiday season since at least 1969.
Retailing giant Wal-Mart Stores Inc. is one of the few bright spots in the current environment. Some merchants including AnnTaylor Loft were already sending out e-mails to customers promoting after-Christmas discounts that can be enjoyed now.