Dec. 24 (Bloomberg) -- The number of Americans filing first-time claims for unemployment insurance last week rose to a 26-year high, indicating employers are stepping up job cuts as the recession deepens.

Initial jobless claims increased more than forecast to 586,000, the most since November 1982, from a revised 556,000 the prior week, the Labor Department said today in Washington. The four-week moving average of claims, a less volatile measure, also was the highest since 1982.

Employers including automakers accelerated firings in the final months of 2008, and job losses for the year are forecast to exceed 2 million. The deteriorating labor market prompted President-elect Barack Obama this week to expand his economic stimulus goals and call for creating or saving 3 million jobs over the next two years.

“This level is consistent with pretty significant declines in payrolls,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “The economy is still deteriorating and I don’t think there will be a quick turnaround.”

Initial claims were projected to increase to 558,000, from an originally reported 554,000 the prior week, according to the median of 32 forecasts in a Bloomberg News survey. Estimates ranged from 535,000 to 595,000.

Four-Week Average

Along with the level of continuing claims, the four-week moving average signals job losses are accelerating. The average rose to 558,000 for the period ended Dec. 20, compared with 544,250 the prior week, which was the week the government surveys companies for its monthly employment report.

For the week ended Nov. 15, which was the survey period for November, the four-week average was 507,000. The number of people staying on benefit rolls fell to 4.37 million in the week ended Dec. 13 from 4.387 million.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.3 percent. The unemployment rate, continuing claims and the state claims figures are reported with a one-week lag.

Twelve states and territories reported an increase in new claims for the week ended Dec. 13, while 41 had a decrease.

Jobless claims reflect weekly firings and tend to rise as job growth -- measured by the monthly payroll report -- slows. The government is scheduled to release its December employment report on Jan. 9.

Economy Shrank

The weekly initial claims level has jumped by more than 200,000 since the beginning of the year, as the housing downturn spread into an overall global recession. The U.S. economy shrank at a 0.5 percent annual pace in the third quarter, the Commerce Department said yesterday.

The economy entered a recession in December 2007, the National Bureau of Economic Research announced Dec. 1. Economists surveyed by Bloomberg earlier this month projected gross domestic product would shrink this quarter by 4.3 percent, the biggest decline since 1982, and would continue contracting through the first half of 2009.

The Federal Reserve Dec. 16 cut its benchmark interest-rate target to as low as zero and said it will buy debt as the next step in combating the longest recession in a quarter-century and reviving credit. In the statement accompanying its decision, the Federal Open Market Committee said “labor-market conditions have deteriorated.”

Kemet Corp., the maker of circuits for electronics manufacturers, said Dec. 22 it will eliminate 1,500 manufacturing jobs, or 14 percent of its workforce, slashing the pay of most salaried employees by 10 percent and suspending matching contributions to 401(k) retirement plans.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

Last Updated: December 24, 2008 09:28 EST