THE ECONOMY : Sluggishness Is Continuing, Reports Show

New applications for jobless benefits fell in mid-December but remained at recessionary levels, the government said Thursday, while other reports provided further evidence of persistent sluggishness in the economy.

The nation’s purchasing managers said economic growth fell sharply in December, and the government said spending in the construction sector in November fell for the first time since June.

“These are more signs that economic growth has slowed dramatically,” but not that a new recession has begun, said Irwin Kellner, chief economist at Chemical Bank.

The Labor Department said first-time unemployment claims for the week ended Dec. 21 fell to 438,000 from a revised 467,000 the previous week, the second straight weekly decline.

The four-week average of new claims, considered a better indication of the job market, fell to 453,000 from 462,000 the prior four weeks.

“We have not seen a trend yet in the employment figures, and with other layoffs that were announced, it doesn’t look like the claims figures will get better,” said Jean Sundrla, economist at Evans Economics Inc.

In one of the first reports on the economy’s performance last month, purchasing managers said activity in the manufacturing sector fell sharply, indicating a slowdown in the overall economy.

The National Assn. of Purchasing Management said its purchasing managers index dropped to 46.5% in December from 50.1% in November. A figure below 50 suggests that the manufacturing sector--which accounts for a fifth of total economic activity--is shrinking. The index is compiled from surveys of buyers at industrial companies.

“The economy has moved sideways and has declined slightly in the last quarter,” agreed Ian Borsook, senior economist at Merrill Lynch & Co.

In a separate report, the government said construction spending fell 0.8% in November after a 0.6% rise in October.

The decline came primarily from decreased spending for construction of office and other commercial buildings. Spending on single-family home building rose a modest 0.7%.

Katherine Kobe, an economist at Joel Popkin & Co., said she expects spending on residential construction to pick up as low mortgage rates attract more buyers to the housing market.

Declining interest rates and lower home prices made houses more affordable in November, the National Assn. of Realtors reported.

The trade group said its index of home affordability rose to a 17 1/2-year high. The index measures the ability of a family earning $36,584 to buy a median-priced home of $97,800. Half of the nation’s homes are priced above the median and half below.