Associated Press
WASHINGTON — The average number of newly laid-off workers over the past month hit a 10-year high, and consumers retrenched as the terror attacks damaged the teetering economy.
The latest batch of economic data released Thursday underscored the fragile state of the U.S. economy, which many analysts believe will fall into recession this year.
"The job market will continue to deteriorate, and consumer spending will go backward for a couple of quarters," predicted economist Clifford Waldman of Waldman Associates. "A real recovery in the economy is six to nine months away."
The four-week moving average of claims for unemployment benefits rose last week to a seasonally adjusted 463,000, the highest level since Dec. 14, 1991, when the country was mired in its last recession, the Labor Department said. The moving average smoothes out week-to-week fluctuations.
Consumers cut back on their purchases in September, leaving retailers with their weakest sales performance in at least two decades, analysts said. Consumer spending accounts for two-thirds of all economic activity and has helped to keep the economy out of recession.
"The shock effect from the attacks and job losses that were pretty significant in September all weighed on consumers," said Tim O’Neill, chief economist with the Bank of Montreal and Harris Bank.
Reports from the nation’s largest merchants showed that department stores, particularly Federated Department Stores and Dillard’s, and specialty apparel stores again languished as consumers were hesitant to make apparel and other discretionary purchases.
Discounters, particularly Wal-Mart Stores Inc., fared better. So did other stores, including arts and crafts retailer Michael’s, as consumers retreated to their homes.
Still, Jeffrey Feiner, managing director of Lehman Brothers, said his company’s retail index, which tracks 22 companies, registered its lowest September reading — a 1.4 percent gain — in the 20 years since it was first compiled.
Many economists believe the economy, which grew at an anemic 0.3 percent in the third quarter, slipped into reverse in the third and fourth quarters, dragged down by reduced consumer spending and business investment.
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