WASHINGTON - THE US economy jolted into reverse during the third quarter as consumers cut back on their spending by the biggest amount in 28 years, the strongest signal yet the country has hurtled into recession.
Consumers ratcheted back their spending at a 3.1 per cent pace in the third quarter, the most since the second quarter of 1980, when the country was in the grip of recession. -- PHOTO: APThe broadest barometer of US economic health, gross domestic product, shrank at a 0.3 per cent annual rate in the July-September quarter, the Commerce Department reported on Thursday.
It marked the worst showing since the economy contracted at a 1.4 per cent pace in the third quarter of 2001, when the nation was suffering through its last recession.
The latest GDP reading marked a rapid loss of traction for the economy, which logged growth of 2.8 per cent in the second quarter, and is sure to buttress the belief of many economists that the nation is in the throes of a painful downturn.
The deterioration reflected a sharp retrenchment by consumers, whose spending accounts for the largest chunk of national economic activity.
Consumers ratcheted back their spending at a 3.1 per cent pace in the third quarter, the most since the second quarter of 1980, when the country was in the grip of recession.
GDP measures the value of all goods and services produced within the United States and is the broadest barometer of the country's economic health.
While the third-quarter's contraction wasn't as deep as the 0.5 per cent annualized decline analysts expected, the poor showing underscored the terrible toll of the housing, credit and financial crises.
The grim report comes just days before Americans pick their next president on Nov 4.
Whether Democrat Barack Obama or Republican John McCain wins the White House, the incoming president will inherit a deeply troubled economy and a record-high budget deficit that could cramp his domestic agenda.
Jobless claims remain elevated due to weak economy
WASHINGTON - NEW claims for US unemployment benefits were unchanged last week, remaining at the same elevated level due to the struggling economy, the government said on Thursday.
The Labor Department said new claims for jobless benefits for the week ending Oct. 25 stood at a seasonally adjusted 479,000, the same as the previous week and above analysts' estimates of 475,000.
The four-week average, which smooths out fluctuations, was 475,500, down 5,000 from the previous week's total.
The number of people continuing to claim unemployment benefits also improved, falling 12,000 to 3.72 million.
The figures still reflect a weak economy struggling from a financial meltdown, rapid drops in housing prices and cutbacks in consumer spending.
Jobless claims above 400,000 are considered a sign of a recessionary economy. A year ago, claims stood at 332,000, the department said.
Four weeks ago, the impact of the economic slowdown as well as Hurricanes Ike and Gustav sent jobless claims to a seven-year high of 499,000. This week, the impact of Hurricane Ike added about 7,500 claims in Texas, the department said.
Companies cut 760,000 jobs in the first nine months of this year, sending the unemployment rate to 6.1 per cent in September. Many economists expect the rate to increase to 8 per cent or higher by next year.
Several companies have announced mass layoffs recently, including Whirlpool Corp., financial services company National City Corp. and Xerox Corp. -- AP
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