U.S. jobless claims tally tops 5 million mark

updated 11:43 a.m. ET Feb. 26, 2009

WASHINGTON - New jobless claims rose more than expected last week and the number of Americans continuing to receive unemployment benefits has topped 5.1 million, fresh evidence the recession is increasingly forcing employers to shed jobs.

The Labor Department said Thursday that first-time requests for unemployment benefits jumped to 667,000 from the previous week's figure of 631,000. Analysts had expected a slight drop in claims.

The 667,000 new claims are the most since October 1982, though the labor force has grown by about half since then. The four-week average of initial claims, which smooths out fluctuations, rose to 639,000, the highest in more than 26 years.

JPMorgan Chase & Co. added to the bad news Thursday, saying that it would eliminate about 12,000 jobs as it folds in the operations of failed savings and loan Washington Mutual Inc.

Separately, U.S. manufacturers saw orders for big-ticket goods plunge by a larger-than-expected 5.2 percent in January as global economic troubles cut demand from customers at home and abroad.

The latest report on U.S. factory activity, released by the Commerce Department, showed orders falling for a record sixth straight month. The previous record of four months came in 1992.

And new home sales tumbled 10.2 percent to a seasonally adjusted annual rate of 309,000 last month, the worst showing on government records going back to 1963.

The median sales price fell to $201,100 in January, a record 9.9 percent drop from the previous month. The median price is the midpoint, where half sell for more and half for less. But even lower prices and low mortgage rates haven't ended the housing market slump.

All told, it points to more dismal news for an economy stuck in a negative cycle, where consumers scale back purchases as jobs vanish, home prices drop and stock portfolios shrink. Those factors fuel more job cuts by profit-starved businesses.

Companies are "becoming extremely cautious and ... shelving their capital spending plans and working with the minimal possible work force," said Zach Pandl, an economist at Normura Securities International.

Nigel Gault, chief U.S. economist at the IHS Global Insight consulting firm, said: "We have been looking for signs that the economy's rate of decline might be slowing, but can't find any."

The stock markets shook off the bad news and rose on hopes that the Obama administration is setting aside up to $750 billion to aid the U.S. financial services industry. The Dow Jones industrial average added about 80 points and broader indices also rose in midday trading.

Meanwhile, the number of people receiving unemployment insurance for more than one week also increased more than expected to 5.1 million. That's the fifth straight week the figure has set a new record-high on data going back to 1967, and compared with only about 2.8 million people a year ago.

As a proportion of the work force, the number of people continuing to receive benefits has reached its highest point since July 1983.

An additional 1.4 million people were receiving benefits under an extended unemployment compensation program approved by Congress last year, as of Feb. 7, the latest data available. That brings the total number of jobless benefit recipients to roughly 6.5 million.

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