Initial claims filed for unemployment benefits rose to 658,000 in the week ended Sept. 4, the highest figure since the recession began more than a year ago, the Labor Department reported yesterday.
It was the sixth consecutive increase in initial claims and provided clear evidence that the recovery from the recession has not yet begun. It also indicated that the unemployment rate, 9.8 percent in July and August, will rise to 10 percent or more in September, analysts said.
In another development, the Federal Reserve said that the use of production capacity in manufacturing industries fell in August to 69.4 percent, only 0.4 of a percentage point above the postwar low reached in March 1975. A year earlier, 79.6 percent of the capacity was in use.
In primary processing industries, such as steel, the utilization rate set a new low at 65.5 percent, down slightly from the low of 65.6 percent recorded in July.
"These reports simply underscore the fact that the recovery is going to be painfully slow in coming," said Allen Sinai, senior vice president of Data Resources Inc., an economic consulting firm.
Already weakened businesses face still more cutbacks in production and capacity utilization, and probably more layoffs, too, he said.
"We're unlikely to see major declines in production and utilization," but there is also little chance of improvement before substantial gains show up in both sales and new orders, Sinai said.
Robert Ortner, the Commerce Department's chief economist, said slow sales and low factory use make it unlikely that executives will be pushing the recovery by adding on to old plants or building new ones.
"They obviously don't need the extra capacity," he said.
He added, however, that the low factory-use level could have one positive aspect: "It shows us we don't have to worry about a resurgence of inflation along with an upturn in the economy."
Ortner agreed that an upturn depends on spending by consumers, which has not increased in the wake of the July tax cut in the way administration economists had hoped. "What I would like to see is a pickup in spending. The consumer can still save us," Ortner said, but he added that if September sales don't pick up, there will be reason for real worry.