Economic Despair

Today, the US labor department provided dismal unemployment numbers. The number of newly laid off workers filing claims for unemployment benefits skyrocketed and posted the largest increase since early February.

Benefit applications reached 337,000 last week, an increase of 28,000 from the previous week - the biggest one-week surge since jobless claims jumped 42,000 the week of Feb. 10.

These numbers should come as no surprise. The combined effects of a crashing housing market and the credit crunch are starting to impact the labor market.

If anyone is in any doubt that the US economy is in trouble, then they should take a long hard look at today's results from Bank of America. It is sorry story of defaults, write-downs and poor investments.

Bloomberg - Bank of America Corp., the second- largest U.S. bank, said profit declined 32 percent in the third quarter after trading losses, defaults and writedowns cost about $4 billion.

Net income fell to $3.7 billion, or 82 cents a share, according to a company statement, missing the $1.06 a share average estimate from 16 analysts surveyed by Bloomberg. The Charlotte, North Carolina-based bank set aside $3.3 billion for potential bad loans after U.S. home foreclosures rose to a record.

Bank of America fell the most in eight months in New York trading after Chief Executive Officer Kenneth Lewis called the results unacceptable. Lewis said during a conference call that the company plans to scale back its investment banking unit after trading mistakes led to $717 million of losses.

``The next couple of quarters will be messy for Bank of America,'' said Andrew Seibert, a fund manager at Pittsburgh- based Stewart Capital Advisors, which oversees $950 million and owns Bank of America shares. ``You are only seeing the beginning. The banks will be putting up a lot of money for reserves.''

Bank of America fell $1.42, or 2.8 percent, to $48.61 in 11:02 a.m. New York Stock Exchange composite trading. The bank's shares were down 6.3 percent this year through yesterday, compared with Citigroup Inc.'s 20 percent decline and JPMorgan Chase & Co.'s 4 percent drop.

Third-quarter revenue was $16.3 billion, falling short of analysts' estimates of $17.9 billion. The year-earlier profit was $5.4 billion, or $1.18, a share. Return on equity, a gauge of how effectively the company reinvests profits, shrank to 11 percent, from 16.6 percent a year earlier.

The US construction industry sank deeper into recession last month. According to the commerce department, new home starts recorded a 10.2 percent decline and now stand at the lowest level in 14 years.

However, news from the housing market is likely to get much worse before it gets better. New building permits, a sign of future construction, declined by a staggering 7.3 percent, following on from a 4.8 percent decrease in August.