Unemployment Claims Up; Consumer Confidence Sags

WASHINGTON —  Lines for U.S. jobless benefits lengthened last week and confidence tumbled in August, signs that even before devastating attacks in New York and Washington, the U.S. economy seemed headed for trouble.

The number of Americans seeking first-time jobless benefits last week rose beyond expectations to 431,000 claims, while the number of Americans staying on benefits hit a nine-year high, according to a Labor Department report released Thursday.

More bad news about the economy came in the form of a survey released Thursday but conducted before the attacks, showing U.S. consumer confidence sagging in August.

Confidence is a key indicator because consumer spending, which fuels two-thirds of economic activity, has been the most important factor keeping the U.S. economy out of recession.

“Clearly, in view of the terrorist attack, most likely these numbers will get worse before they get better,” Sung Won Sohn, chief economist with Wells Fargo & Co., said of the jobless claims. “This clearly indicates that the labor market is deteriorating and that the U.S. economy is probably inching closer toward a recession.”

Although this latest jobless-claims report did not reflect the Tuesday attacks, analysts say it probably still heralds a weak September employment report and signals the U.S. may be closer to recession. And its economic woes probably will be amplified by the attacks.

The claims data for the week ended Sept. 8 were significantly higher than the 404,000 claims analysts had forecast. The four-week moving average of jobless claims, considered a more reliable barometer of employment conditions because it irons out weekly fluctuations, rose to 411,000 last week from 399,500. That was the highest level since July 14, when the average climbed to 415,250.

In another telling sign of a weak economic performance to come, U.S. consumer sentiment plunged sharply in September, dragged down by crumbling expectations for the future, according to the University of Michigan’s latest survey, conducted before Tuesday’s attacks.

The university’s preliminary consumer sentiment index, which is released directly to subscribers only, plunged to 83.6--the lowest level this year--from 91.5 in August, sources said. Economists had forecast the index to read 90.8.

The current-conditions index in that survey, a gauge of how comfortable American consumers feel about present economic conditions, tumbled to 93.5 in September from 101.2 in August.

The September preliminary expectations gauge of the index, which measures consumers’ attitudes about the year ahead, fell sharply to 77.2 in September from 85.2 in August.

Prices of imported goods fell in August for the sixth time in seven months, government figures showed, a sign the threat of inflation remains subdued.

The 0.1% drop last month in the import price index, which gauges the cost of goods and raw materials from abroad, followed a revised decline of 1.5% in July, the Labor Department said. Imported building materials, paper and computers became less expensive.

Excluding petroleum, import prices fell 0.4% after a 1% drop the previous month. It was the seventh straight monthly decline. A strong dollar and slower economic growth have made foreign goods cheaper and reduced the ability of U.S. companies to raise prices.