New unemployment claims highest in 26 years

As a proportion of the work force, the number of people continuing to receive benefits is the highest since August 1992, when the U.S. was recovering from a relatively mild recession. The increase in continuing claims was the largest jump since November 1974, the department said.

Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. Last year, initial claims were 337,000.

The figures come a day after the Treasury Department reported a record budget deficit for November, driven by lower tax revenues and higher spending on programs such as unemployment insurance and food stamps.

In just the first two months of the budget year that started Oct. 1, the budget deficit totaled $401.6 billion, nearly matching the record gap of $455 billion posted for all of last year, the department said Wednesday.

Economists expect the deficit will top $1 trillion in the current budget year, which would be a post-World War II high when measured as a percentage of the economy.

The economy has been hit hard by the ongoing housing slump and financial crisis, which have sharply reduced household wealth as stock prices and home values have declined. Consumers and businesses have dramatically cut back their spending. The National Bureau of Economic Research said this month that the economy fell into a recession in December 2007.

The Labor Department said last week that employers cut a net total of 533,000 jobs in November and the unemployment rate reached 6.7 percent, a 15-year high. The rate would have been higher, except that more than 400,000 Americans gave up looking for a new job and weren't counted in the labor force.

The latest jobless claims figures indicate that the December unemployment report could be at least as bad as November's, Abiel Reinhart, an analyst at JPMorgan Chase Bank, wrote in a client note.

Companies have eliminated a net total of 1.9 million jobs this year, and some economists project the total cuts could reach 3 million by the spring of 2010.

A number of large U.S. employers announced layoffs this week, including Dow Chemical Co., 3M Co., Anheuser-Busch InBev, National Public Radio and the National Football League.

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