By CHRISTOPHER S. RUGABER
The Associated Press
WASHINGTON - Americans are rapidly shifting from spendthrifts to savers, slowing the broader economy, as they remain wary in the face of rising layoffs.
New economic reports Thursday suggest this dynamic won't change anytime soon. Retail sales and orders for manufactured goods fell. And the number of people claiming jobless benefits remained near record highs. The government is expected to report today that the unemployment rate rose again in February, with employers cutting nearly 650,000 jobs.
Consumers' growing frugality has hammered automakers, among other industries.
Bill Hampel, chief economist for the Credit Union National Association, said his group's members are reporting record increases in deposits. Government figures show the savings rate jumped to 5 percent in January from zero last spring. That's the highest rate since 1995 and a much faster shift than he had expected, Hampel said.
Consumer spending makes up about 70 percent of the economy. It topped out at 71 percent in 2005, Hampel said, but will likely drop by 2 to 3 percentage points over the next few years.
Several economists said government spending, particularly President Barack Obama's $787 billion stimulus plan, is likely to be the only source of growth in the coming months. Other drivers of the economy, such as business investment, are likely to decline further.
Retailers from Target Corp. to American Eagle Outfitters Inc. to Macy's Inc. reported Thursday that their sales fell last month, though in many cases not as sharply as expected. Walmart Stores Inc. was one bright spot as the discount giant's same-stores sales, which measures sales at stores open at least one year, rose 5.1 percent.
Separately, the Commerce Department said demand for manufactured products dropped 1.9 percent in January.
That was smaller than the 3.5 percent drop economists had expected, but it was the sixth consecutive monthly fall - the longest such stretch on records dating back to 1992.
The weakness in January included a big plunge in orders for transportation equipment. That reflected the continued troubles of automakers struggling with the lowest sales in decades.
As demand for all types of goods dries up, companies are laying off workers at a furious pace. The Labor Department said the number of new claims for jobless benefits dropped last week to 639,000 from 670,000 the previous week.
The 639,000 new claims were fewer than analysts had projected. But the four-week average of new claims, which smooths out fluctuations, rose to 641,750 - the highest since October 1982, when the economy was emerging from a steep recession. The labor force, though, has grown by about half since then.