(AP) - The number of laid-off workers continuing to draw unemployment benefits bolted to 4.5 million in late December, and even more Americans are expected to join the ranks of the jobless in 2009.
While first-time applications for jobless benefits dropped last week, economists mostly attributed that to the Christmas holiday and cautioned that a more accurate picture of new layoff filings won't become clear until the holiday season is passed - around mid-January.
All in all, though, the picture that emerged Wednesday was largely grim and is not expected to improve any time soon.
"It wasn't a very merry Christmas for most of the labor force and it doesn't look like it will be a very happy New Year, either," said Richard Yamarone, economist at Argus Research.
The Labor Department's report showed that people continuing to draw unemployment benefits jumped by 140,000 to 4.5 million for the week ending Dec. 20, the most recent period for which that information is available.
The larger-than-expected increase underscored the difficulties the unemployed are having in finding new jobs.
That left continued claims at their highest since early December 1982, when the country was emerging from a deep recession, though the labor force has grown by about half since then.
A year ago, the number of people continuing to draw jobless benefits was 2.7 million.
The report also showed that the number of newly laid-off workers filing first-time applications for jobless benefits dropped by a seasonally adjusted 94,000 to 492,000 for the week ending Dec. 27.
That decline, however, didn't signal any improvement in labor conditions. The drop - while bigger than economists expected - was mostly related to seasonal adjustment difficulties and reflected some out-of-work people not making it to unemployment offices to file claims over the Christmas holiday, analysts said.
Even with the drop, new filings remained elevated. A year ago, claims stood at 339,000.
Similarly, the four-week moving average of first-time jobless claims, which smooths out week-to-week fluctuations, fell last week to 552,250, a decrease of 5,750 from the prior week. A year ago, this figure was 344,500.
Economists expected so-called "continued" claims to rise to around 4.38 million, and that first-time applications for unemployment benefits would drop to around 550,000.
On Wall Street, investors took some comfort in the drop in first-time unemployment claims. The Dow Jones industrials added nearly 110 points on the last trading day of a tumultuous 2008.
Next week's jobless claims report also is likely to be distorted by another shortened holiday week because of New Year's Day, analysts said.
"The bottom line here is that it probably won't be until mid-January that we begin to get a clear picture of what claims are saying," said Abiel Reinhart, economist at JPMorgan Chase Bank.
Economists predict the jobs situation will get worse before it gets better.
Brian Bethune, economist at IHS Global Insight, predicts first-time filings for jobless benefits will climb back up to 550,000 or higher in the middle of January and stay in that elevated range for some time.
Meanwhile, the nation's unemployment rate - which zoomed to a 15-year high of 6.7 percent in November - is expected to rise to 7 percent in December when the government releases that report next week. If that proves correct, it would be the highest level since June 1993.
Economists also are predicting employers eliminated another 478,000 jobs in December alone. In November, 533,000 jobs vanished.
Many economists believe the unemployment rate will keep climbing - hitting 8 percent or close to 10 percent at the end of 2009.
Employers have slashed payrolls as they scramble to cut costs. The deepening recession, disappearing jobs, shriveling nest eggs and tanking home values have forced consumers to cut back, which is hurting businesses.
Atlanta-based Interface Inc. on Tuesday said it will lay off about 530 employees to cope with weakening demand for its carpet products.
Other companies that announced mass layoffs recently include: technology services provider Unisys Corp., pharmaceutical company Bristol-Myers Squibb Co., International Paper Co. and Bank of America Corp.
Since the recession began in December of 2007, the economy has lost nearly 2 million jobs.
Spurring job creation is a key priority for President-elect Barack Obama, who takes over on Jan. 20. He is contemplating a massive package of government spending and tax cuts to stimulate the economy.
(Copyright 2008 by The Associated Press. All Rights Reserved.)