WASHINGTON — The number of newly laid-off workers seeking unemployment benefits rose more than expected last week, the latest sign the economy is shrinking and unlikely to rebound anytime soon.

The figures came a day after the government said retail sales dropped sharply in December and the Federal Reserve issued a gloomy economic assessment for the upcoming months.

Economists said the reports illustrate that the economy remains stuck in a downward cycle: Consumers initially cut back spending in response to the housing and credit crises, slowing the economy and leading companies to lay off workers, which spurs even more caution among consumers.

The Labor Department said yesterday that first-time requests for unemployment insurance jumped to a seasonally adjusted 524,000 last week, above analysts' expectations of 500,000 new claims.

The increase is partly due to a flood of requests from newly laid-off people who delayed filing claims over the holidays, a Labor Department analyst said.

GM BASING PLANS ON LOWER OUTLOOK

NEW YORK — General Motors Corp. said yesterday that it's basing its turnaround plan on the assumption that the auto industry will sell 10.5 million cars and trucks in the U.S. this year, a 1.5 million drop from the expectation it shared with Congress last month.

While asking lawmakers for $18 billion in loans, the Detroit automaker said it expected industrywide sales of about 12 million for 2009, with 10.5 million seen as a worst-case scenario.

The Treasury Department allocated $13.4 billion in loans to GM last month, and the company must submit a plan to show the Treasury Department that it is cutting enough costs to become viable, or the government can call back the loans March 31.

OIL PRICES NEAR FIVE-YEAR LOWS

NEW YORK — Oil prices flirted with five-year lows yesterday as unemployment benefit claims rose and OPEC cut demand expectations for 2009.

Any belief that energy prices had bottomed out were wiped away early in the day as crude plumbed new depths for the year and more government data suggested the economy may be worsening.

Light, sweet crude for February delivery fell 5 percent, or $1.88, to settle at $35.40 a barrel yesterday on the New York Mercantile Exchange.

Prices fell as low as $33.20 yesterday and only gave up steep losses when the Dow Jones industrial average rebounded.