Factory Orders Drop 3.8% in December : * Economy: The steep decline indicates that a recovery is not under way, analysts say. Meanwhile, claims for jobless benefits continue to remain high.

Factory orders fell a hefty 3.8% in December, contributing to the steepest annual loss since the previous recession nine years ago, the Commerce Department reported Thursday.

“The sharp decline reinforces the expectation that a broad-based improvement in the economy is not underway and not likely to begin until spring,” said Larry Meyer, head of Laurence H. Meyer & Associates, a St. Louis economic forecasting service.

In a second report that analysts said provides more evidence of a stagnant economy, the Labor Department said there was little improvement in the number of initial claims for jobless insurance in late January.

“It suggests that we really have a very, very weak employment situation,” economist Gilbert Benz of Swiss Bank Corp. of New York said. “It suggests very little income growth and very little spending” needed to boost the economy.

The Commerce Department report said factory orders were slashed by 2.6% last year to $2.8 trillion. It was the largest decline since a 3.5% plunge in the recession year of 1982 and the first decrease since a 0.3% loss in 1986.

Orders for both long-lasting durable and for non-durable goods suffered annual losses. The manufacturing sector had shown signs of recovery at midyear but then faltered during the fall.

In December, orders totaled a seasonally adjusted $233.8 billion, down from $243.1 billion a month earlier. The 3.8% drop was the steepest since orders sank 6.2% in November, 1990.

Factory orders are a gauge of manufacturing industry plans. Continuing declines could mean lower production and loss of jobs in a sector representing nearly 25% of the nation’s economic activity.

Analysts also noted that businesses cut their orders for non-defense capital goods, often a barometer of plans to expand and modernize. Excluding aircraft, these orders fell 1.0% in December.

The Labor Department report said 450,000 people filed new claims for jobless insurance in the week ending Jan. 25, down from a revised 460,000 a week earlier.

But because of the weekly volatility, many analysts look more to a four-week moving average that showed claims holding in a 432,000 to 439,000 range.

“I think the numbers are consistent with an unemployment rate staying in a range from 7% to 7.25% during the first part of the year,” Meyer said.

The department will release January’s jobless rate today. It stood at 7.1% in December, the highest since June, 1986.

Orders for durable goods--items such as cars and computers expected to last more than three years--tumbled 5.2% in December, even further than the initial 5% estimate reported last week. These orders had edged up 0.6% in November.

Some analysts suggested that the weakness in the durable goods sector was exacerbated by businesses that postponed purchases so they could take advantage of an expected investment tax credit request in President Bush’s Jan. 28 State of the Union message.

Bush ultimately proposed a 15%, first-year credit for equipment purchased after Feb. 1 and before Jan. 1, 1993.

Orders for non-durable goods, such as clothing and chemicals, fell 2.4% after edging up 0.2% in November.

Shipments of factory orders, a gauge of current production, declined 3.4%, the first drop since they fell 1.9% last March. Still, shipments for the year were down 1.9%, the biggest decline since they fell 2.8% in 1982.

Factory Orders Decline

Total new orders in billions of dollars, seasonally adjusted

Dec., ‘91: 233.8

Nov., ‘91: 243.1

Dec., ‘90: 238.2

Source: Commerce Department