Budget deficit, jobless claims and Dow all surge
WASHINGTON – The nation’s financial picture grew darker Thursday, a day marked by breathtaking numbers: a quarter-trillion-dollar budget deficit for a single month and projections of up to $1 trillion for a year, a half-million new applications for unemployment benefits and a 900-point swing on Wall Street.
There was some good news, with the stock market rallying from near its lows for the year to its third-biggest point gain ever. But analysts predicted that the steady drumbeat of gloomy statistics would only get worse in coming months.
The initial costs of the government’s economic bailout efforts sent the U.S. budget deficit for October soaring to a record $237.2 billion, putting it on track to reach the once-unfathomable sum of $1 trillion for the year.
“And as bad as these numbers are, they may look good a year from now because things are going to get much worse,” said Sung Won Sohn, an economist at the Smith School of Business at California State University.
In more grim economic news released Thursday, the number of newly laid-off workers applying for jobless benefits last week hit the highest level since the period right after Sept. 11, 2001.
As the economy weakens, the government’s fiscal health was projected to deteriorate, too, with layoffs cutting into tax revenues and forcing higher payouts for programs such as unemployment benefits and food stamps.
Unemployment, which jumped to a 14-year high of 6.5 percent in October, is now projected to climb above 8 percent. Sohn said that will further crimp government tax revenues, which were down 7.5 percent in October from a year ago.
The stream of negative news initially sent Wall Street down sharply, with the Dow Jones industrials briefly trading below 8,000. The markets rebounded with a fury, though, and closed up almost 553 – the third-largest point gain on record, following the 889-point rise on Oct. 28 and the 936-point surge on Oct. 13.
The Treasury Department said the $237.2 billion deficit for October, the highest ever for a single month, reflected the $115 billion spent last month to purchase stock in eight of the country’s biggest banks, the opening phase in the $700 billion rescue of the financial system passed by Congress on Oct. 3.
The Labor Department reported that the number of new applications for jobless benefits jumped by 32,000 to 516,000 last week. That nearly matched the 517,000 claims reported seven years ago, and it is only the second time since 1992 that claims have topped 500,000.
On Capitol Hill, congressional Democrats pushed forward a package to pump $25 billion in emergency loans into U.S. automakers, but Sen. Chris Dodd, D-Conn., said the package lacked support.
“I don’t know of a single Republican who’s willing to support” the idea, said Dodd, chairman of the Senate Banking Committee. He personally backed the proposal but cautioned against “bringing up a proposition that might fail.”
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