U.S. business productivity fell in the fourth quarter as output plunged at its fastest pace since 1982, while one in eight U.S. households ended 2008 behind on its mortgage or in foreclosure, according to data on Thursday that underscored the economy's weakness.

Pointing to the continued acceleration of the 14-month recession, orders received by U.S. factories fell for a sixth straight month in January, suggesting that further job losses are inevitable in the months ahead.

The Labor Department said U.S. non-farm productivity, a measure of the output per worker hour of goods or services, fell at a revised 0.4 percent annual rate, sharply below initial estimates of a 3.2 percent advance published last month and a 2.2 percent rise in the third quarter.

Output was revised to show a steep 8.7 percent decline in the fourth quarter, the sharpest decline since the first quarter of 1982. It was initially estimated as a 5.5 percent fall.

So much for the surprising strength in productivity late last year; the only bit of good news from Q4 is gone, said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

In a separate report, the Labor Department said the number of U.S. workers filing new claims for jobless benefits fell by 31,000 to a seasonally adjusted 639,000 in the week ended February 28 from an upwardly revised 670,000 the prior week.

We had a bit of a drop, but a drop from a high level, so the numbers remain very high. This continues to be a very weak labor market, said David Wyss, chief economist at Standard & Poor's in New York.


With unemployment at a 16-1/2-year high and rising, more borrowers will be late paying their mortgages or fall into foreclosure this year, the Mortgage Bankers Association said.

While California, Florida, Nevada, Arizona and Michigan continue to dominate the delinquency numbers, some of the sharpest increases we saw last quarter in loans 90 days or more delinquent were in Louisiana, New York, Georgia, Texas and Mississippi, signs of the spreading impact of the recession, said Jay Brinkmann, chief economist of the MBA.

Of particular concern, he said, is a sharp pickup in joblessness among people with college educations.

The number of people staying on the government's jobless benefits roll after drawing an initial week of aid eased by 14,000 to 5.11 million in the week ended February 21, the latest week for which the data is available, from 5.12 million the previous week.

That number remains near record highs, showing the harsh economic environment is making it tough to find new jobs.

Escalating job losses as companies struggle with falling revenues and tight profit margins are further crimping households' spending capacity, creating a vicious cycle for the an economy entangled in a recession since December 2007.

Investors are bracing for an ugly February non-farm payrolls report on Friday, which a Reuters survey forecast would show job losses around 648,000 and the unemployment rate at its highest in a quarter century.

The government is intervening with a $787 billion stimulus package to try and break the economy's alarming downward spiral. But the success of this plan depends on stabilizing the fractured financial system and collapsed housing market.

The unemployment rate was 3.8 percent in the week ended February 21, unchanged from the previous week.


Separately, the Commerce Department said factory orders fell 1.9 percent in January from a revised 4.9 percent decline in December, previously reported as a 3.9 percent drop.

The successive decline in orders is the longest streak since the series started in 1992, the department said.

New orders for manufactured durable goods were revised to show a 4.5 percent drop, which was previously reported as a 5.2 percent decrease.

An indicator of business confidence fell, as non-defense capital goods orders excluding aircraft slipped by 5.7 percent. Inventories of manufactured goods eased 0.8 percent, the biggest drop since September 2003, when the stock of unsold goods fell by a similar margin, the department said.

Inventories have been falling for five consecutive months, which is the longest streak of straight monthly declines since the period from March 2003 to January 2004.

(Editing by Dan Grebler)