Washington, DC, Aug. 24—The number of laid off workers receiving unemployment benefits has hit a nine year high—more evidence that the yearlong economic slowdown has been taking a toll on the nation's labor markets. According to the Labor Department, the number of Americans collecting unemployment benefits rose to 3.18 million in the week ending August 11, the highest level since September 1992, when the country was struggling to emerge from the last recession.

In addition to those already getting benefits, the Labor Department said the number of newly laid off workers filing applications for benefits rose by 8,000 last week to 393,000, the highest level since mid-July.

Private economists feel the increase in new claims and the rising number of people receiving benefits were indications of growing strains because of the weak economy.

“The labor market hasn't seen the worst of this slowdown,” said Richard Berner, chief U.S. economist at Morgan Stanley. “There are more layoffs to come.”

The government’s figures come after another string of layoff announcements in recent weeks ranging from Ford, the nation's second largest automaker, to Lucent, the telecommunication equipment giant, and Steelcase, the second leading office furniture manufacturer.

The unemployment rate remained unchanged at 4.5% in July, but economists warned it was likely to rise to 4.6% this month and top 5% by the end of the year as more companies cut workers in the face of sluggish sales.

“There has been more deterioration in labor markets. We’re not out of the woods yet in terms of whether we’ll have a recession or not,” said Michael Niemira, chief economist at Bank of Tokyo-Mitsubishi in New York.

The concern is that rising layoff notices could cause a sharp cutback in spending by worried consumers. So far, consumer spending, which accounts for two thirds of total economic activity, has offset a steep slide in business capital spending and kept the country out of a full blown recession.

The Federal Reserve cut interest rates for a seventh time on Tuesday in an easing cycle that began at the beginning of the year. However, the rate cut was only a quarter point, disappointing those on Wall Street who had been hoping for a half point reduction. At their June 27 meeting, when the Fed also cut rates by a quarter point, a number of Fed officials expressed the view that the central bank “might well be near the end of its easing cycle,” according to minutes of those discussions.

Both Berner and Niemira said they had not ruled out the possibility that the country will dip into a recession this year. Berner said he believed second quarter economic growth, first reported at an extremely weak 0.7%, will be placed in negative territory when the government issues its revisions of the gross domestic product (GDP) next week and he predicted the third quarter to be negative as well. A recession is marked by two consecutive negative quarters of GDP.

However, other economists insisted there are signs that growth is beginning to pick up. Even if the Fed does not cut rates again at its October 2 meeting, it has already lowered rates enough to guarantee the economy will regain its footing, they said.

These analysts noted another report Thursday showing 30 year fixed rate mortgages declined to 6.91% this week, the second straight week the rate has been below 7%. Low interest rates are keeping home sales and auto sales at strong levels despite the economic slowdown, which began last summer.

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