WASHINGTON — On the eve of what is expected to be the clearest evidence yet of the nation’s deepening recession, bad news rolled in from across the economy and the world.
Sales of new homes in December plummeted, corporations announced plans to cut another 13,000 US jobs, unemployment claims jumped and a troubled icon of US manufacturing, Ford Motor Co., Thursday announced a massive loss.
Early Friday morning in Japan, the government there announced that factory output had fallen by 9.6 percent and joblessness in the world’s second-largest economy jumped to 4.4 percent, the largest increase in 41 years.
The accelerating pattern of grim indicators now focuses on the scheduled report Friday morning of US economic performance during the final three months of last year. Many economists believe the economy shrank by as much as six percent — a decline that would be the biggest year-on-year shrinkage of the economy since 1982 — and they see little potential for growth until later this year.
Capturing the sentiment of a nation caught in an economic tailspin, President Obama said Thursday that it was “shameful” that Wall Street firms doled out nearly $20 billion in executive bonuses even as the government was spending billions of dollars to rescue financial firms.
Stocks stumbled Thursday on the dire economic data, with the Dow Jones industrial average dropping 2.7 percent, or 226.44 points, to close at 8,149.01.
The slowdown has had a major impact on home sales. Sales of new homes in December plummeted 14 percent from the month before and nearly 45 percent from the period a year ago, according to government data released Thursday. It was the worst month on record dating to the early 1960s.
Recent data has been even gloomier than many analysts’ estimates. Home sales, for instance, were expected to fall to an annual pace of 397,000; instead it dropped to 331,000. Layoffs, too, have piled up faster than expected, worsening the outlook for an economic recovery.
Contributing to Thursday’s job cuts was Eastman Kodak, the photography company based in Rochester, N.Y., which said it plans to slash up to 4,500 jobs, a fifth of its workforce. Kansas airplane company Cessna said it would let go of 2,000 workers, while Oshkosh, a Wisconsin maker of fire engines and dump trucks, said it will lay off about 1,000. British drugmaker AstraZeneca announced it would eliminate 6,000 jobs, including an undisclosed number in the United States, bringing its planned layoffs over the next five years to 15,000.
“Everybody, established corporations are pulling in the horns and trying to weather the storm,” said John Ryding, chief economist for RDQ Economics, a research firm in New York.
Job cuts have swelled the ranks of those receiving unemployment benefits. Thursday, the Labor Department announced that the number of people continuing to claim unemployment insurance had jumped more than expected, reaching 4.8 million for the week ending Jan. 17, the highest level since record-keeping began in 1967. As a percentage of the labor force, jobless claims fall short of the peak reached in the recession of the early 1980s.
Corporate layoffs are mounting as businesses scale back production in response to a drop in consumer spending. Orders for durable goods, big-ticket items such as washing machines and autos, decreased 2.6 percent in December, the fifth consecutive monthly decline, according to data released Thursday. Excluding defense purchases, the decline was an even steeper 4.9 percent.
Businesses have little reason to resume their previous pace of production and won’t for some time to come, Wachovia economist Tim Quinlan said. With fewer orders coming in, business inventories have grown 17 of the past 18 months. Goods are piling up at every step of the distribution chain, from manufacturing plants to retail stores. Quinlan said he doesn’t expect business spending to rebound until the second half of 2010.
Ford reported a $14.6 billion loss in 2008, the automaker’s worst annual performance in its history. Manufacturing conglomerate 3M is preparing for the worst. Thursday, after reporting a 37 percent drop in fourth-quarter profits, the Maplewood, Minn.-based company said it would cut capital spending by 30 percent and conserve cash. The announcement came just weeks after the firm, which makes Scotch tape and Post-It Notes, said it would lay off 1,800 worldwide, put off merit pay raises and alter its vacation policies - all moves that 3M estimates will save it more than $400 million over the next several years.
“The fourth quarter ... was different from any pattern we’ve ever seen before, the synchronization of the world’s economy in simultaneous contraction,” chief executive George Buckley told analysts Thursday on a conference call. “Weak business conditions for consumer confidence and psychological fear factor made it worse.”
The job cuts at Cessna are in addition to 2,200 announced by Textron, its parent company, earlier. Textron said Thursday it plans to reduce capital spending by 42 percent and close its commercial finance business to help improve its cash position.
AstraZeneca spokesman Raymond Parisi said the additional job cuts announced yesterday are part of a restructuring effort that began in 2007. More than half of the 15,000 planned job cuts have already occurred. The money the company will save as a result of the layoffs will enable it to invest in other areas, Parisi said.
“The growth rate is not as high as its been,” he said. “Basically, we’re making sure we’re fit for what we need to do to deliver on our commitments.”