December wholesale prices fall 1.9 percent

First-time claims for unemployment benefits rose more than expected and prices paid to U.S. producers tumbled, signaling no end to the job-market rout and collapse in raw-materials prices spurred by the deepening recession.

Initial jobless claims increased to 524,000 in the week ended Jan. 10, the Labor Department said Thursday. That was up from 470,000 the previous week, which was revised from the 467,000 initially estimated. Economists surveyed by Bloomberg had expected 503,000 initial jobless claims.

The Labor Department also said wholesale prices fell 1.9% in December, capping the first annual drop since 2001. Separately, the Federal Reserve said manufacturing in the Philadelphia and New York regions shrank further in January.

The figures show the effects of a worsening global economic downturn that is hammering companies that include Alcoa Inc., General Electric Co. and engine-maker Cummins Inc., which all announced additional job cuts this month.

The Federal Bank of Philadelphia’s general economic index was minus 24.3 this month compared with minus 36.1 in December. The New York Fed’s Empire State index was at minus 22.2, from a revised minus 27.9 in December that was lower than previously reported. Readings below zero indicate a contraction.

“The economy is in horrible shape and probably getting worse,� said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “All of the trends that have been in place are worsening. The downward momentum is building in the labor market; there’s pressure on consumers and tight credit.�

The 1.9% drop in the producer-price index in December was the fifth straight monthly decline and followed a 2.2% decrease in November. Excluding fuel and food, the so-called core rate rose 0.2% in December after a 0.1% gain in November.

Falling commodity costs and asset values are raising concern among some Fed officials about the danger of price decreases that would worsen the economic downturn.