Jobless data, retail sales add to recession fears

By Richard Satran

The reports arrived as the U.S. Senate put the wraps on a $150 billion-plus package to stimulate the economy and indicated the U.S. Federal Reserve will continue to slash interest rates to stave off a recession.

New applications for U.S. unemployment benefits fell by 22,000 last week, but the number of workers remaining on jobless aid rose to its highest level in more than two years, government data showed.

Wal-Mart Stores reported a lower-than-expected 0.5 percent rise in its January sales at U.S. stores open at least a year, blamed in part on winter storms in the Midwest.

Limited Brands Inc , which owns Victoria's Secret and Bath & Body Works, said same-store sales dropped 8 percent in January and forecast a drop for February, citing decreased mall and store traffic.

The growing ranks of unemployed may be contributing to the downtrend, analysts said. The number of workers filing first-time claims edged down to 356,000 from 378,000 for the previous week, the Labor Department said. The weekly figure exceeded the 340,000 economists expected.

"In this environment, simply cutting back on hiring will not be enough for companies to maintain earnings as demand slows; jobs will have to be cut too," said Ian Shepherdson, chief U.S. economist for High Frequency Economics in Valhalla, New York.

The economic downturn was triggered by a rising level of failures on subprime mortgages and falling home prices. A government official meeting with analysts on Thursday cautioned patience in forecasting an economic turnaround, even with the rate cuts and stimulus package.

Housing starts are forecast to fall 20 percent in 2008, according to a report from the National Association of Realtors on Thursday. The group also said its index of pending home sales for December fell 1.5 percent, slightly more than economists expected.