Jobless claims surge while trade deficit narrows

Applications for unemployment benefits soared to the highest level since just after the Sept. 11, 2001, terrorist attacks while the trade deficit shrank more than expected as demand for imports plunged, further evidence of the struggling U.S. economy.

The Labor Department reported Thursday that jobless claims shot up by 32,000 last week to a seasonally adjusted 516,000, the highest total in seven years. The tally was much higher than analysts expected and a further indication of how much the labor market is deteriorating amid the shrinking economy. The government reported last week that the unemployment rate surged to a 14-year high of 6.5 percent in October.

Meanwhile, the Commerce Department said the trade deficit declined by a bigger-than-expected amount in September, falling by 4.4 percent to $56.5 billion as imports experienced a record plunge.

The import decline was led by a huge fall in imported oil as the average price for crude dropped by a record $12.41 per barrel and the volume of shipments fell to the lowest level in five years. But demand for other types of imports also fell, with imported cars and car parts dropping to the lowest level in more than five years, an indication that foreign automakers are feeling the pinch hitting U.S. consumers.

President-elect Barack Obama has said that dealing with the worst financial crisis to hit this country in seven decades will be his No. 1 priority when he takes office, and his Democratic allies in Congress were laying the groundwork for changes with hearings scheduled Thursday.

The House Oversight Committee will examine the role hedge funds may have played in recent market turbulence. Among those scheduled to testify was billionaire investor George Soros, chairman of Soros Fund Management.

Meanwhile, the Senate Banking Committee will hear from executives of a number of financial institutions including Bank of America (nyse: BAC - news - people ), JPMorgan Chase (nyse: JPM - news - people ) and Wells Fargo (nyse: WFC - news - people ) on the issue of how the government's $700 billion rescue effort is operating, and particularly whether the government should be requiring more commitments on the use of the money to address rising mortgage foreclosure problems.