New Unemployment Claims Dip, but Layoffs Continue

Homeowners are taking advantage of some of the lowest mortgage rates since the 1960's.

(ABCNEWS.com)

Fewer people than expected requested unemployment benefits last week, but the dip is likely to be temporary as more companies lay off workers, and economists expect the jobless rate to rise as the recession deepens.

Companies ranging from satellite radio operator Sirius XM Radio Inc. to heavy equipment maker Caterpillar Inc. announced job cuts Thursday. New York-based Sirius said it would cut more than 450 jobs, or about 20 percent of its work force, by the end of the year. Peoria, Ill.-based Caterpillar said it will lay off more than 800 workers.

The stock markets fell on investor concerns about the economy and a ratings downgrade on an American icon. Standard & Poor's Ratings Service lowered its outlook for General Electric Co. and its GE Capital finance arm to negative from stable. The Dow Jones industrial average dropped more than 219 points, or about 2.5 percent, to 8,604.99.

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Still, some good economic news emerged Thursday. Freddie Mac said mortgage rates have fallen to the lowest level on records dating back to 1971, in part due to the Federal Reserve's cut of its key short-term rate to nearly zero Tuesday.

Separately, federal regulators adopted sweeping new rules for the credit card industry that will shield consumers from increases in interest rates on existing account balances. And President-elect Barack Obama indicated that more regulatory changes are coming.

But the latest jobless claims numbers were sobering. They showed that besides laying off workers, employers are slow to hire, trends that economists said will send the unemployment rate higher in coming months.

The Labor Department reported that new applications for jobless benefits fell to a seasonally adjusted 554,000 for the week ending Dec. 13, from an upwardly revised figure of 575,000 the previous week.

One likely reason for the improvement is that the figure was inflated two weeks ago by applicants who delayed filing their claims during the Thanksgiving holiday week, a Labor Department analyst said. The government tries to account for such volatility with its seasonal adjustments but is not always successful.