Last Week in the News (January 5, 2009)

The Labor Department said initial claims for state unemployment insurance benefits fell to a seasonally adjusted 492,000 in the week ending December 27 from 586,000 the prior week. It was the steepest decline since 1992. That decline, however, didn’t necessarily signal an improvement in labor conditions. Analysts said the drop — while bigger than economists had expected — reflects seasonal adjustments due to the holidays.

On Monday, December 28, the government reported that the interest rate yield on six-month U.S. Treasury bills at the weekly auction dropped to its lowest level on record. The Treasury Department said it auctioned $27 billion in six-month bills at a yield of 0.25%. Treasury rates have fallen to historic lows as the financial turmoil has triggered a rush by investors to the safety of government securities.

According to MasterCard Inc.’s SpendingPulse, total retail sales, excluding gasoline and autos, were down between 2.5% and 4% this holiday season. That would be the largest drop since 1969. Sales of electronics and appliances dropped 26% compared to last year. Retailers typically generate as much as 40% of their annual sales during the holiday season.

On Tuesday, the Conference Board reported that its consumer confidence index fell to 38 in December from 44.7 in November. Economists had expected the index to rise to 45.2.

The Standard & Poor’s/Case-Shiller 20-city housing index fell by 18% from October 2007 to October 2008, the largest drop on record. The 10-city index dropped 19.1%, its biggest decline in its 21-year history.

Upcoming on the economic calendar are reports on construction spending on January 5 and factory orders on January 6.