US falls deeper into recession as job market darkens

WASHINGTON: US consumers cut their spending for a fifth straight month in November as a year-old recession tightened its grip, but with prices
dropping, they got more for each dollar, a report showed on Wednesday.

A separate report showed initial claims for jobless aid last week hit the highest level in 26 years. The Commerce Department said spending shrank by 0.6 percent last month after falling by 1 per cent in October. However, a sharp drop in prices pushed inflation-adjusted spending up by 0.6 per cent, the first increase since May.

The report also showed incomes fell 0.2 per cent after a slight gain in October, a sign of the strain consumers were under as the holiday shopping season started.

Separately, the Labour Department said the number of US workers filing new claims for unemployment benefits jumped by 30,000 to 586,000 last week, the highest since November 1982, suggesting a steepening drain of jobs is likely into 2009. "All in all, the scenario remains pretty weak," said Daniel Katzive, director of global foreign exchange for Credit Suisse in New York.

The latest data wouldn't change most forecasters view that the US economy is still weakening, he said. The incoming administration of President-elect Barack Obama is preparing a huge economic stimulus package to complement the Federal Reserve's efforts at boosting economic activity through reduced interest rates. A third report from Commerce showed orders for long-lasting durable goods slipped 1 per cent in November, a less severe drop than anticipated but it comes after the biggest drop in October orders since mid-2000.

Orders plummeted 8.4 in October. There were some positive notes in the durables report, as orders rose in November for computers, machinery and fabricated metal products. Transportation equipment orders, down 7.4 per cent after a 12.7 per cent October decline, was the main drag on orders. Excluding transportation, durable goods orders were up 1.2 per cent after falling 6.8 per cent in October but analysts doubted it marked any turning-point in economic prospects.

Most analysts think mid-2009 is the earliest point at which some relief from the current severe downturn may start to be seen. "The pickup in orders in November does not meaningfully alter the underlying weak trend, but it was a relief to see at least a pause in the downward movement," said Michael Moran, chief economist for Daiwa Securities America in New York.

The spending report showed personal savings edged up in November to 2.8 per cent of disposable income from 2.4 per cent in October, still a low level but a possible sign the year-old recession is causing consumers to begin putting more into bank accounts rather than spending it. Prices fell 1.1 per cent as gasoline costs continued to slide. But so-called core prices, which strip out volatile food and energy costs, held steady for a second straight month.