New unemployment claims surge unexpectedly

The Labor Department reported Thursday that initial applications for jobless benefits in the week ending Dec. 6 rose to a seasonally adjusted 573,000 from an upwardly revised figure of 515,000 in the previous week. That was far more than the 525,000 claims Wall Street economists expected.

Elsewhere, the U.S. trade deficit rose unexpectedly in October as a spreading global recession dampened the once-strong sales of American exports and the volume of oil imports surged by a record amount, the Commerce Department said.

More layoffs were announced Thursday. New Britain, Conn.-based tool maker Stanley Works said it plans to cut 2,000 jobs and close three manufacturing facilities, while Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, said it will cut 700 jobs as the Downers Grove, Ill.-based company outsources parts of its business.

New jobless claims last week reached their highest level since November 1982, though the labor force has grown by about half since then.

The trade deficit rose to $57.2 billion in October, from an imbalance of $56.6 billion in September. Analysts had been looking for the deficit to decline to $53.5 billion on lower oil prices. Oil prices did drop by a record amount, but that was offset by a record surge in the volume of oil imports.

The reports, along with investor concerns that an auto bailout bill may not pass the Senate, sent stock markets slightly lower. The Dow Jones industrial average fell about 15 points in morning trading.

The jump in initial jobless claims is partly due to a rebound in claims from the previous week, which included the Thanksgiving holiday, a Labor Department analyst said. Government offices were open for fewer days that week.

Still, the four-week average, which smooths out fluctuations, was a seasonally-adjusted 540,500, the highest since December 1982, when the economy was emerging from a steep recession.

"Stepping back from the short-term noise ... it is very clear that the underlying trend in claims is still rocketing, as companies throw in the towel and prepare for a long, deep recession," Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a note to clients.

The number of people continuing to claim jobless benefits also jumped much more than expected, increasing by 338,000 to 4.4 million, the Labor Department said. Economists expected a small increase to 4.1 million. The figure for continuing claims lags initial claims by one week.

As a proportion of the work force, the number of people continuing to receive benefits is the highest since August 1992, when the U.S. was recovering from a relatively mild recession. The increase in continuing claims was the largest jump since November 1974, the department said.

Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. Last year, initial claims were 337,000.

The figures come a day after the Treasury Department reported a record budget deficit for November, driven by lower tax revenues and higher spending on programs such as unemployment insurance and food stamps.

In just the first two months of the budget year that started Oct. 1, the budget deficit totaled $401.6 billion, nearly matching the record gap of $455 billion posted for all of last year, the department said Wednesday.

Economists expect the deficit will top $1 trillion in the current budget year, which would be a post-World War II high when measured as a percentage of the economy.

The economy has been hit hard by the ongoing housing slump and financial crisis, which have sharply reduced household wealth as stock prices and home values have declined. Consumers and businesses have dramatically cut back their spending. The National Bureau of Economic Research said this month that the economy fell into a recession in December 2007.

The Labor Department said last week that employers cut a net total of 533,000 jobs in November and the unemployment rate reached 6.7 percent, a 15-year high. The rate would have been higher, except that more than 400,000 Americans gave up looking for a new job and weren't counted in the labor force.

The latest jobless claims figures indicate that the December unemployment report could be at least as bad as November's, Abiel Reinhart, an analyst at JPMorgan Chase Bank, wrote in a client note.

Companies have eliminated a net total of 1.9 million jobs this year, and some economists project the total cuts could reach 3 million by the spring of 2010.

A number of large U.S. employers announced layoffs this week, including Dow Chemical Co., 3M Co., Anheuser-Busch InBev, National Public Radio and the National Football League.

Dow Chemical to slash 5,000 jobs, close 20 plants

Dow Chemical Co. said Monday it will slash 5,000 full-time jobs -- about 11 percent of its total work force -- close 20 plants and sell several businesses to rein in costs amid the economic recession.

The company, one of the largest chemical makers in the world, expects the moves to save about $700 million per year by 2010. Dow also will temporarily idle 180 plants and prune 6,000 contractors from its payroll.

"We are accelerating the implementation of these measures as the current world economy has deteriorated sharply, and we must adjust ourselves to the severity of this downturn," Chief Executive and Chairman Andrew N. Liveris said in a statement.

Last month, Dow Chemical had said it would review all options to reduce costs and eliminate or defer capital spending. "We are going to take necessary, bold and proactive measures to manage our transformation through these extremely challenging times," Liveris said at the time.

The company said it will take a fourth-quarter charge of $700 million, or 50 cents to 60 cents per share, to cover $350 million in severance payments and $350 million worth of plant shutdown costs.

But the company denied it will suspend dividend payments as a way to conserve cash. In a conference call Monday, Liveris said Dow has paid a dividend each quarter for nearly 100 years, and has no plans to stop that trend.

"We will not break that string...not on my watch," he said.

The Midland, Mich.-based company expects "the new Dow" to be comprised of three units: joint ventures; performance products; and health and agriculture, advanced materials and other market-facing businesses.

The reorganization comes just days after the company closed on its K-Dow Petrochemicals joint venture with a company controlled by the Kuwait government. The K-Dow venture, which both companies estimate will be worth about $17.4 billion, is slated to open by Jan. 1 and will market plastics and other related products. Dow and Kuwait's Petrochemical Industries Co. hope the venture will help them capture a larger share of the global chemicals market and boost profitability.

Dow also is slated to close on its $15.3 billion buyout of Rohm & Haas Co. early next year, a deal it hopes will help it grow into the high-margin specialty chemicals market. The company expects that deal to results in about $800 million in savings over time.

The joint venture and Rohm & Haas deal come as the global credit markets have all but ground to a halt, leading some to question the validity of high-priced deals amid the economic turmoil.

Dow Chemical's latest actions follow those of rival DuPont, who last week said it would cut 2,500 jobs and warned it won't turn a profit in the fourth quarter due to a severe slowdown in the automotive and construction markets.

Wilmington, Del.-based DuPont also is releasing 4,000 contractors by the end of this year, with additional contractor reductions expected in 2009, and will implement work schedule reductions and redeploy more than 400 employees on projects to reduce working capital and operating costs.

DuPont, one of the world's largest chemicals makers, is stopping all discretionary spending, slowing or halting noncritical projects, and temporarily idling more than 100 manufacturing units. The year-long restructuring plan will affect about 4,200 employees, or roughly 7 percent of DuPont's work force.

Shares of Dow Chemical jumped $1.24, or 6.5 percent, to $20.24 in morning trading. The stock is still worth less than half of its 52-week high of $45.50, set nearly a year ago. Shares of DuPont rose $1.17, or 4.9 percent, to $25.29, as the broader markets rallied early in the session.

Automakers back to try to sell Congress on rescue

U.S. automakers are returning to Congress for high-stakes hearings they hope will persuade skeptical lawmakers to save their troubled industry with $34 billion in emergency aid, but a top Senate Democrat wants to hand their problem to the Federal Reserve.

Two weeks after a botched attempt on Capitol Hill, repentant leaders of General Motors Corp., Ford Motor Co. and Chrysler LLC were appealing to the Senate Banking Committee on Thursday with three separate survival plans that include massive restructuring, the ditching of corporate jets and vows by CEOs to work for $1 a year.

But they could expect a chilly reception on Capitol Hill. Even a top Democrat in charge of evaluating their aid requests made it clear he was eager to avoid voting on a bailout. Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, wrote to Federal Reserve Chairman Ben Bernanke on Wednesday asking the central bank chief whether there was anything stopping him from using his considerable lending authority to help the automakers.

And Senate Majority Leader Harry Reid, D-Nev., said it was up to the Bush administration to unilaterally rescue the Big Three with loans drawn from the $700 billion Wall Street rescue fund, since Congress was still unwilling to do so. "I just don't think we have the votes to do that now," he told The Associated Press.

Dodd's committee was hearing testimony on the companies' plans from GM CEO Rick Wagoner, Ford CEO Alan Mulally, Chrysler CEO Bob Nardelli, UAW president Ron Gettelfinger and the head of the Government Accountability Office. The House Financial Services Committee was to hold a similar session on Friday.

Automakers were trying to make the case that the billions in loans would be a bridge to survival and profitability.

In the streets outside the Capitol, all three companies were showcasing their futuristic, green models in hopes of counteracting their image as purveyors of gas-guzzling SUVs. Wagoner planned to drive to the hearing in a test version of the Chevrolet Volt, an extended-range electric vehicle expected to go on sale in 2010.

Reid and House Speaker Nancy Pelosi, D-Calif., said the hearings would help determine whether Congress would consider a massive aid package for the industry in a special session next week. Critics say the companies have been poorly managed and failed to show they won't be back for another government rescue.

The Big Three are struggling to stay afloat heading into 2009 during an economic recession, a steep decline in sales and a tight credit market. The three companies burned through nearly $18 billion in cash reserves during the last quarter.

Chrysler said it needed $7 billion by year's end to keep operating. GM asked for an immediate $4 billion as the first installment of a $12 billion loan, plus a $6 billion line of credit to use if economic conditions deteriorate. Both said in plans submitted to Congress that they could drag the entire industry down if they fail. Ford requested a $9 billion "standby line of credit" in case one of its Detroit competitors fails.

Wagoner and Mulally both say said they'll work for $1 a year -- a move Chrysler's Nardelli has already made -- if their firms accept government loans. All three plans envision the government getting a stake in the auto companies that would allow taxpayers to share in future gains if they recover.

In Detroit, the United Auto Workers union said it would delay the three companies' payments to a multibillion-dollar, union-run health care trust and essentially end a jobs bank program in which laid-off workers are paid most of their salaries. They also decided to let the Detroit leadership begin renegotiating elements of landmark contracts signed last year, a move that could lead to wage concessions.

The companies, union officials and car dealers were lobbying feverishly for the loans, arguing that the collapse of one or more of the Detroit carmakers would throttle the already weakened U.S. economy and jeopardize the nation's manufacturing sector.

Yet the bailout remains unpopular with the public. Sixty-one percent oppose providing the auto companies with billions in federal assistance, according to a CNN-Opinion Research Corp. poll released on Wednesday. Fifty-three percent said it would not help the country's economy.

The auto executives were roundly criticized for taking corporate jets to the hearings last month and this time made the 520-mile trip to Washington aboard hybrid cars. Underscoring the different approach, Wagoner and GM officials ate lunch Wednesday at Quiznos at a Pennsylvania rest stop along the way.