Jobless Claims Hit 16-Year High Amid New Fears of Deflation

Other data show that the construction of new homes has fallen to a record low.

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New economic indicators underscore not only that a recession is already occurring but that it's a deep one. One sign came from the Labor Department's unemployment benefits claims, which spiked last week to the highest level in 16 years—back when the U.S. economy was coming out of a recession. The new figure belied predictions that claims were going to decrease. The unemployment rate in October was 6.5 percent, and analysts expect it to reach 8 percent by the end of 2009.

Meanwhile, data released yesterday showed that the housing market sank to historic lows in October. The construction of new homes fell to the lowest level since the government began tracking figures in January 1959—a 38 percent decline from the same time last year. But given the odds against the market—lowered demand, too many homes for sale, and builders' difficulty in securing financing against a backdrop of a tough credit market and climbing foreclosure rates—it's hardly surprising.

Another glum sign: the consumer price index. It fell 1 percent in October, the biggest plummet since monthly data began to be tracked in 1947. A lot of that is because of the falling price of oil, which dropped below $50 a barrel today. But even when you take out the unstable indexes of food and energy, the news isn't good. The "core" price index—drawn from the price of other goods like clothing and cars—fell 0.1 percent in October, which is the first time it has dropped over the course of a month since 1982.

All that bad data helped drive down the stock market. The Dow fell to its lowest point in almost six years yesterday, closing below 8000 for the first time since 2003. Shares also fell at the open today. Meanwhile, markets abroad were shaky, with the Tokyo Nikkei stock average tumbling nearly 7 percent, making its loss this year nearly 50 percent, and the Moscow exchange was forced to halt trading for an hour when shares fell 7.6 percent.

But some good news came for one country at least: Iceland, which had been pleading for a bailout plan, has received the first $827 million of a $2.1 billion loan from the International Monetary Fund, and Nordic countries have pledged to loan it another $2.5 billion. The IMF also has announced that it will bail out Hungary, Pakistan, and Ukraine, while Turkey seems very likely to be next on the list.