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FINANCIAL CRISIS

Tough time for American shoppers

AP, Washington
There are ample reasons for America's shoppers to act like grinches this holiday season, with lost jobs, wilting retirement accounts and shrinking home values topping the list.
And if anyone needed more evidence of consumers' weary state and the nation's deteriorating job market, they got it Thursday with the latest batch of bleak economic data.
The number of newly laid-off people signing up for unemployment benefits last week dropped by 21,000 to 509,000, the Labor Department reported. Even with the drop which was better than the increase economists were forecasting the level of jobless applications was still quite high and pointed to a deeply troubled employment climate.
The number of people continuing to draw unemployment benefits last week climbed to 4.09 million, a 26-year high.
AT&T, the Dallas-based telecom m u n i c a t i o n s giant, announced Thursday it will slash 12,000 jobs or about 4 percent of its work force in response to all the economic troubles. Job reductions will take place this month and into next year.
A grim picture was forming as retailers reported their November salesThursday.
Costco Wholesale Corp., usually a strong performer, reported a bigger-than expected drop in same-store sales. Other retailers that saw declines in same-store sales are Bon-Ton Stores Inc., Limited Brands Inc. and Pacific Sunwear of California Inc. Samestore sales, or sales at stores open at least a year, are considered a key indicator of a retailer's health.
All told, the Goldman Sachs-International Council of Shopping Centres sales index of retailers is expected to show a 1 percent drop in November, slightly worse than the 0.9 percent decline in October. That would be the weakest November performance since at least 1969 when the index began.
"Basically shoppers and workers are being told there is no Santa Claus," said Richard Yamaronc, an economist at Argus Research.
Another economic report is expected to show that orders placed with U S. factories fell in October, reflecting pull backs from
buyers in the United States as well as shoppers overseas, who are coping with their own economic troubles.
Federal Reserve Chairman Ben Bernanke, meanwhile, will speak about the housing crisis, which has driven up foreclosures and forced financial companies to log massive losses on soured mortgage investments. The housing debacle touched off the worst financial crisis since the 1930s that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to bring under control.
And the chiefs of Chrysler LLC, General Motors Corp, and Ford Motor Co. return to Capitol Hill Thursday and Friday to make a fresh plea for as much as $34 bil lion in emergency aid. frying to win over sceptical lawmakers, automakers and their union on Wednesday promised labour concession and restructuring.
Were one or more of Detroit's Big Three to fail, that would deepen the recession and cause more job losses, industry officials warned.
Heading into the holidays, the country’s economic picture has darkened further, according to a Federal Reserve survey of business conditions around the country released on Wednesday. Americans hunkered down, forcing retailers to ring up fewer sales and factories to cut back on production.
The survey suggested the country was sinking deeper into recession.
"Economic activity weakened across all Federal Reserve districts," the report concluded.
The Fed didn't use the word "recession," but just two days earlier the National Bureau of Economic Research declared what many Americans already knew in their bones that the country had
been suffering through one since last December.
To cushion the fallout, Bernanke said Monday that the central bank is prepared to lower its key interest rate and to explore other ways to revive economic activity. Many economists predict the Fed will cut its rate now near a historic low of 1 percent at its last scheduled meeting this year on Dec. 16.
"Wo ve seen tilings fall off a cliff," said economist Ken Mayland, president of ClearView Economics. "Everybody consumers and businesses are just freezing"
"Retailers were preparing for a relatively slow holiday sales season," the Fed report said. New York retailers said the holiday sales season is likely to feature more discounted prices on merchandise than last year. Some retailers in the Fed regions of Boston,
Philadelphia, Cleveland and Dallas planned to cut capital spending projects for 2009.
Consumer spending which includes retail sales is a major shaper of national economic activity. But job cuts, tanking investment portfolios and sinking home values have made American consumers wary of spending.
The economy jolted into reverse in the summer as consumers slashed their spending by the most in 28 years.
Many believe the economy will continue to shrink through the rest of this year and into the first quarter of next year. At 12 months and counting, the current recession is longer than the 10-month average length of recessions since World War II. The record for the longest recession in the postwar period is 16 months, which was reached in the 1973-75 and 1981-82 downturns.