WASHINGTON — New claims for unemployment benefits rose more than expected last week, the government said Wednesday, while consumers cut back on their spending for the fifth straight month amid a deepening recession.
The Labor Department reported that initial requests for jobless benefits rose to a seasonally adjusted 586,000 in the week ended Dec. 20, from an upwardly revised figure of 556,000 the previous week. That's much more than the 560,000 economists had expected.
That's also the highest level of claims since November 1982, though the work force has grown by about half since then.Spending decreases
The Commerce Department said consumers reduced their spending by 0.6 percent last month after a 1 percent drop in October. But the steep plunge in gasoline prices, which is 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.
Analysts attributed the rebound in inflation-adjusted spending to the huge plunge in gasoline prices and aggressive discounting by retailers trying to salvage the holiday shopping season. But they viewed it as a temporary blip and not the start of a sustained recovery for the consumer sector.
Brian Bethune, an economist at IHS Global Insight, predicted that consumer spending would fall at an annual rate of 2.5 percent to 3 percent in current quarter after a 3.8 percent drop in the third quarter. That decline was the worst in 28 years.
Consumer spending is closely tracked by economists because it accounts for two-thirds of the total economy.
Home Buyers Tracking Real Estate Markets, Spending More Time Online
Discount grocers win over shoppers
