Retail sales and prices drop by a record amount.  Retail sales fell 2.8 percent in October, according to the Commerce Department, the largest monthly decline since 1987.  This latest drop in sales was the fourth straight monthly decline and is a signal that the US economy may be in its worst slump since the double dip recession of the 1980’s.  The retail sales numbers reflect the decline in consumer confidence that began in the first quarter of 2007 but has accelerated over the last two quarters.  Spending is expected to continue to decline as mounting job losses and plunging stock and home values have left household balance sheets at their weakest point in decades.

Initial unemployment claims nearly 520,000.  Initial claims jumped 32,000 from last week’s revised figure of 484,000 and follow the announcement that the unemployment rate has risen to 6.5 percent.  The four week average for initial claims, at 491,000, is now at its highest level since March 1991.  Additionally, the total number of unemployed receiving benefits rose to the highest level since 1983.  Restrictions in the credit market and falling aggregate demand have caused companies to lay off workers and put off investment.  Additional layoffs threaten to further squeeze consumer spending, which accounts for about 70 percent of GDP, and threatens to further accelerate the economic downturn.

U.S. trade deficit shrinks to $56.5 billion despite falling exports. The U.S. trade deficit narrowed in September by 4.4 percent to $56.5 billion, the smallest gap in nearly a year. However, even this seeming bright spot reflects the tenuous position of the American economy.  The lower trade deficit was not the result of increasing exports, which actually fell due to a weakening global economy and a stronger dollar, but was instead largely the result of lower spending on oil imports, which dropped because of lower oil prices and reduced consumption.  Excluding petroleum imports, the U.S. trade deficit widened.  The shrinking of the Euro-zone and Japanese economies will continue to hurt U.S. exports in the coming months.