Bleak Economic Picture Emerges From New Data

A series of gloomy economic reports Wednesday showed consumers holding tight to their wallets with job losses expected to mount in the months ahead.

In this picture provided by GM worker Kim Clay, an unidentified employee watches as the last sport...

In this picture provided by GM worker Kim Clay, an unidentified employee watches as the last sport utility vehicle, a GMC Envoy, rolls down the assembly line the GM Moraine Assembly plant in Dayton, Ohio on Tuesday, Dec. 23, 2008, during the final shift at the plant. Several reports due Wednesday are expected to provide more evidence that consumers are cutting back on spending and companies are eliminating jobs in the face of a deepening recession.

(Kim Clay/AP Photo)

There was one glimmer of good news, however. Lower gas prices and widespread holiday discounts are giving consumers greater buying power. Consumer spending, when adjusted for those price drops, rose last month after five months of declines, the Commerce Department said.

Late Wednesday, the Federal Reserve granted a request by the financing arm of General Motors to tap the government's $700 billion rescue fund, bolstering GM's ability to survive.

The Fed said it had approved GMAC Financial Services' request to become a bank holding company. That designation makes GMAC eligible to receive a portion of the bailout fund and get emergency loans directly from the Fed.

Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down.

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Even though consumer spending, adjusted for inflation, rose in November, economists don't expect consumers to ramp up spending anytime soon. In part, that's because companies in a wide range of sectors have been laying off workers.

November's inflation-adjusted increase in spending is "a temporary, one-month aberration in the downward trend of consumption," said Brian Fabbri, chief economist at BNP Paribas.

Without adjusting for inflation, the Commerce Department said consumer spending fell by 0.6 percent in November, the fifth straight month of decline.

Separately, the Labor Department said the number of Americans who filed initial claims for unemployment benefits rose to the highest level in 26 years, though the labor force has grown by about half since then.

New claims for jobless benefits jumped to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week.

A Labor Department analyst said auto-related layoffs were a key factor behind the rise in jobless claims. The four-week average of initial claims, which smooths out fluctuations, rose to 558,000. That's the highest since December 1982, when the economy was emerging from a steep recession.