Economy in sorry shape, reports show

The government released a quartet of reports Wednesday that paint a bleak picture of the nation’s economy: Jobless claims remain at recessionary levels, Americans cut back on their spending by the largest amount since the 2001 terrorist attacks, orders to U.S. factories plummeted and new-home sales fell to the lowest level in nearly 18 years.

The Labor Department reported that initial requests for jobless benefits fell to a seasonally adjusted 529,000 from the previous week’s upwardly revised figure of 543,000. But the four-week average, which smooths out fluctuations, rose to 518,000, its highest level since January 1983, when the economy was emerging from a steep recession.

One minor bright spot was that the number of people continuing to claim unemployment insurance dropped unexpectedly to 3.96 million from the previous week’s 4.02 million, which was the highest level in 25 years.

The Commerce Department reported that consumer spending plunged by 1% in October, even worse than the 0.9% decline that had been expected. Consumer spending accounts for two-thirds of total economic activity.

Orders to U.S. factories for big-ticket manufactured goods also plunged last month by the largest amount in two years. Orders for durable goods dropped by 6.2%, more than double the decline economists had expected. The Commerce Department report showed widespread declines throughout manufacturing, led by decreases in autos and airplanes.

The department also reported that new-home sales decreased 5.3% last month to a seasonally adjusted annual sales pace of 433,000 homes, the lowest level since January 1991, another period when the country was undergoing a steep housing downturn.

The drop in new-home sales was bigger than analysts had expected and left sales 40.1% below where they were a year earlier.