WASHINGTON - The nation's jobs market sent a fresh cry of distress as the number of newly laid off people unexpectedly hit the highest level in more than six years, a Labor Department report showed Thursday.

The faltering economy and tight credit have forced companies to cut back, and as the job market shrinks, consumer spending may dwindle, too.

All that spells potentially more trouble for the country later this year as the bracing tonic of the government's tax rebates disappears. "Consumers will be very tight fisted in the coming months," predicted Richard Yamarone, economist at Argus Research. "Nothing shuts down the consumer - and the economy - like the loss of a job."

Companies are laying off workers as they struggle with slowing customer demand, harder-to-get credit and high costs for fuel and other raw materials.

New applications filed for unemployment benefits rose last week by a seasonally adjusted 7,000 to 455,000, the department said in its weekly report. That was the most since late March 2002, when the job market was struggling mightily to get back on its feet after the 2001 recession.

A program to locate people eligible for jobless benefits played a role in last week's increase, a department analyst said. However, the analyst couldn't say how much of a role.

The latest snapshot of layoff filings was worse than economists expected. They were forecasting new claims to drop to around 430,000.

The data disappointed Wall Street and the White House. The Dow Jones industrials tumbled 224.64 points to close at 11431.43.

"The job market isn't strong right now as we work through the downturn in housing and high energy prices. We would like to see more job creation," said White House spokesman Tony Fratto. He credited the government's stimulus program as a helpful cushion.

To that end, consumers - fortified by the rebate checks - boosted their borrowing at a 6.7 percent pace June, the most since November, the Federal Reserve reported.

And, Wal-Mart, the world's largest retailer, along with Costco Wholesale Corp. reported solid sales for July.

Wal-Mart's sales, however, came in a bit below Wall Street forecasts. And, the company projected sales would slow in August as rebate checks dry up. Many apparel stores including Limited Brands Inc., Abercrombie & Fitch Co. and Pacific Sunwear of California were stuck in a rut.

"Times are tough so people are husbanding their money," said Bill Cheney, chief economist at John Hancock Financial Services.

A growing number of economists fear that a pullback by cautious consumers will throw the economy into a tailspin in the final three months of this year.

That's prompting calls from Democrats, including presidential contender Sen. Barack Obama, to enact a second round of stimulus. The Bush administration has been cool to the notion.

Originally published by The Associated Press.

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