New claims for unemployment benefits last week rose to a seasonally adjusted 652,000 from the previous week's revised figure of 644,000, the Labor Department said Thursday. The total number of people claiming benefits jumped to 5.56 million, worse than economists' projections of 5.48 million, a ninth straight record and the highest total on records dating back to 1967.

The dismal job news is one indicator of the overall economic pain Americans have endured early in the new year. The Commerce Department said Thursday that the economy shrank at a 6.3 percent annual pace at the end of 2008, the worst showing in a quarter- century, and a bit faster than the 6.2 percent drop estimated a month ago.

Some economists project the economy is contracting in the current quarter at a 5 to 6 percent pace, still very weak by historical standards, but slightly better than the end of last year.

Nariman Behravesh, chief economist at IHS Global Insight, has a more bearish outlook. He expects a drop between 7 and 8 percent in the January-March period.

"On the other hand, 'the worst of the worst' is probably behind us," he added.

President Barack Obama said Thursday that it will take some time - perhaps through the rest of the year - before vigorous hiring resumes, and that might not happen until businesses see evidence the economy is rebounding.

The stock market shook off the bleak unemployment news. The Dow Jones industrial average added about 125 points in afternoon trading.

Consumers are cutting back under the weight of rising unemployment, falling home values and shrinking investment portfolios. Those factors have forced companies to slash production and jobs. All the negative forces are feeding on each other in a vicious cycle that has deepened the recession, now in its second year.

The number of people claiming unemployment insurance for more than a week has increased by more than 100,000 four times in the past five weeks, an indication that workers are remaining on the rolls longer as they struggle to land a new job after being laid off.

As a proportion of the work force, the number of people receiving benefits is at its highest level since May 1983, when the economy was recovering from a steep recession. The total of nearly 5.6 million is almost double that of a year ago, when about 2.8 million people were continuing to receive unemployment checks.