As unemployment rises, Americans spending less, producing less

A trio of U.S. economic indicators released Wednesday show an American economy continuing to veer off course as Christmas approaches.

Americans spent less in November, the first real proof that the yuletide selling season will be tough for retailers, while U.S. durable goods orders slumped in the same month, a further sign that American manufacturers still face bleak economic prospects.

Finally, in mid-December, the number of first-time jobless benefit claimants hit the highest level in 26 years.

"Today’s releases support our view that the U.S. economy is continuing to experience pronounced weakness in the fourth quarter. We expect the economy will remain weak in [the first half of] 2009," said Josh Heller, an economist with RBC Economics.

Americans cut their spending by 0.6 per cent in November, the fifth month in a row in which U.S. consumers — a famously profligate bunch — cut spending. In October, personal spending fell by one full percentage point.

Interestingly, the news was not all bad. Retailer discounts were a big factor in the month's reduced spending. Once prices were equalized between months, individual outlays actually rose by 0.6 per cent.

That rise will not help retailers but does indicate that buyers are still willing to purchase goods — if the price is right.

Durable order dip

New orders for U.S. durable goods fell by one per cent in November. That meant that the amount of cash going to manufacturers and other producers fell by $1.8 billion US in the month, dipping to $186 billion.

The reduction was actually a bit better than the 3.1-per-cent tumble economists had projected for the month and was much better than October's revised plunge of 8.4 per cent for the same indicator.

In addition, once transportation orders were subtracted, new orders rose by 1.2 per cent.

Still, the figures from the U.S. Commerce Department represented the fourth month in a row in which new orders dropped, a further sign that U.S. goods producers will not have much to cheer about in the coming months.

The number of American men and women who asked for employment benefits for the first time rose by 30,000 for the week ending December 20, boosting total first-time claimants to 586,000 — the highest number since November 1982.

This indicator is often viewed as a proxy for U.S. firings rather than voluntary leavings and a hint as to how these people see their chances at getting new work quickly.