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More Americans Out of Work, Spending Less

World markets were mostly lower Wednesday amid fresh signs of a weakening U.S. economy.

The U.S. Labor Department says 586,000 Americans filed for unemployment benefits last week. The figure is the highest seen in 26 years, an increase of more than 200,000 from a year ago. The four-week average of such claims is also at its highest point since 1982. The Labor Department lists continuing layoffs by American businesses - particularly auto manufacturers - as the main culprit.

University of Maryland economist Peter Morici says the worsening employment picture foreshadows even tougher economic times in the New Year.

"Unemployment claims rose again, enough to take unemployment up to seven percent in December and eight percent in 2009," he said. "The economy is quickly slipping into the worst phase of the recession. Home values, income are down. 2009 will begin on a dark note."

With more people out of work, Americans continue to cut back on purchases. The Commerce Department reports consumer spending fell for the fifth consecutive month in November, the longest decline recorded in the United States in more than four decades. Americans' overall incomes were also down 0.2 percent for the month.

Wisconsin-based economist and business consultant Mary Kay Plantes says, not only are economic conditions causing massive dislocation and pain, they are also fueling an increasingly pessimistic outlook on the part of businesses and consumers that will make an economic turnaround all the more difficult to achieve.

"Until we see an economic stimulus plan that gives us confidence, it is going to be hard to see our way out of the current downturn," she said.

President-elect Barack Obama has promised an aggressive stimulus package to spur jobs creation. One of the central goals behind such a plan is to reverse the damaging cycle of job losses, which force Americans to cut back on spending, which prompts businesses to lay off even more people.

Already, groups are weighing in with ideas to spur the economy. The U.S. National Retail Federation is urging an expansion of so-called "sales tax holidays" when Americans can purchase goods without paying a state sales tax.

"To do this on a national level could move consumers to open up those purse strings again," said NRF Vice President Scott Krugman.

Weak economic data continue to punish fuel prices. Oil prices dipped below $38 a barrel Wednesday, despite falling U.S. inventories of the commodity.

Major markets in Asia and Europe all closed moderately lower. Wall Street's Dow Jones Industrial Average finished a shortened, pre-holiday trading session with a modest gain.