March 12 (Bloomberg) -- First-time claims for U.S. unemployment benefits rose last week, holding above 600,000 for a sixth straight time, as companies kept cutting payrolls to reduce costs amid a worsening recession.

Initial jobless applications increased by 9,000 to 654,000 in the week that ended March 7, more than anticipated, from a revised 645,000 the prior week, the Labor Department said today in Washington. The number of people staying on benefit rolls rose in the previous week by 193,000 to a record 5.317 million.

Employers ranging from United Technologies Corp. to AMR Corp., which owns American Airlines, have announced more than 823,000 job cuts since the November election of Barack Obama, bringing total losses since 2007 to about 4.4 million. U.S. House Speaker Nancy Pelosi said this week she hasn’t ruled out a second economic stimulus if the current package, meant to create or save up to 4 million jobs, doesn’t work quickly enough.

“The numbers continue to worsen,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, who had forecast claims would rise to 650,000. While sales at U.S. retailers were better than expected last month, according to a Commerce Department report today, “it’s hard to believe spending will hold up” with jobless claims so high, he said.

The Commerce report showed U.S. retail sales in February fell less than forecast and January’s gain was almost double the previous estimate.

Sales Ex-Autos Climb

The 0.1 percent decrease reflected a slump in demand for cars and followed a revised 1.8 percent jump in January, the Commerce Department said today in Washington. Purchases excluding automobiles unexpectedly climbed 0.7 percent.

Stocks were lower, with the Standard & Poor’s 500 index down 0.5 percent as of 9:40 a.m. in New York. Treasuries gained, with yields on benchmark 10-year notes falling to 2.89 percent from 2.91 percent yesterday.

Economists projected jobless claims would rise to 644,000 from an originally reported 639,000 a week earlier, according to the median of 45 estimates in a Bloomberg News survey. Estimates ranged from 610,000 to 660,000. Continuing claims were forecast to increase to 5.14 million.

The four-week moving average of initial claims, a less volatile measure, increased to 650,000, the highest in more than 26 years, from 643,250.

States and Territories

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 4 percent, the highest since June 1983, in the week ended Feb. 28. Thirty-five states and territories reported an increase in new claims for that same period, while 18 had a decrease.

Initial claims reflect weekly firings and tend to rise as job growth slows.

The U.S. unemployment rate reached 8.1 percent in February, the highest level in more than a quarter century, Labor said on March 6. Employers eliminated 651,000 positions, the third straight month that losses surpassed 600,000 and the first time that has happened since records began in 1939.

Economists surveyed by Bloomberg News earlier this month predicted the U.S. jobless rate will reach 9.4 percent this year and stay elevated through at least 2011. At the same time, the country’s economy will shrink 2.5 percent in 2009, the biggest contraction since 1946.

‘Contracting Markets’

United Technologies said March 10 it plans to cut 11,600 jobs. The Hartford, Connecticut-based maker of Otis elevators and Carrier air conditioners said it cut its sales projection for the year because of “contracting markets worldwide.”

Chief Executive Officer Louis Chenevert said in a statement that an economic recovery the company anticipated in the second half of 2009 now “appears unlikely.”

American Airlines, the world’s second-biggest carrier, said March 10 it is considering the futures of its three main maintenance bases as it tries to trim operating costs by an additional $130 million this year. Chief Financial Officer Thomas Horton also reiterated the unit’s plan to reduce capacity in its main jet operations by more than 6.5 percent this year.

The soft labor market crippled the spending that makes up about 70 percent of the economy before a rebound in the past two months. Purchases dropped at a 4.3 percent rate in the fourth quarter, the most since 1980, according to Commerce Department figures.

The Obama administration will do “what is necessary” to fix the faltering economy, Treasury Secretary Timothy Geithner said two days ago in an interview with Charlie Rose. He also said the U.S. is in a “deepening recession” and the president will be aggressive in trying to find a solution to the crisis.

Federal Reserve Chairman Ben S. Bernanke said March 7 that the central bank will “forcefully” use every resource to restore financial-market stability and revive economic growth.

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

Last Updated: March 12, 2009 09:46 EDT