WASHINGTON (AP) – Consumer spending and incomes rose more than expected at the start of the year, but the gains were seen as fleeting in light of the recession and the waves of layoffs battering Americans.

Two other reports Monday on manufacturing and construction also showed little reason for optimism. Analysts said any start to an economic rebound is at best months away, with the most pessimistic predicting a sustained recovery won’t begin until next year.

Wall Street plunged anew after a sobering earnings report from American International Group showed the insurance giant lost $61.7 billion in the fourth quarter, the biggest quarterly loss in U.S. corporate history. In response, the government unveiled a revamped rescue package that will provide AIG with another $30 billion in taxpayer money if needed.

The Dow Jones industrial average fell below 7,000 for the first time in 11 years. The credit crisis and recession have slashed more than half of the Dow’s value since it hit a record-high over 14,000 in October 2007. The Dow lost nearly 300 points to 6,763.29.

The Commerce Department said consumer spending rose 0.6 percent in January, the first increase after a record six straight monthly declines, and slightly better than the 0.4 percent rise economists had expected.

Incomes also showed more strength than expected, rising 0.4 percent, although that gain came primarily from annual pay raises for federal workers and a 5.8 percent cost-of-living increase for the 50 million people receiving Social Security benefits.

Private sector wages and salaries, the key component of incomes, actually fell for a fifth straight month. That reflected the wave of layoffs occurring as the recession, already the longest in a quarter-century, intensifies.

Because of all the problems facing the economy, the January rebound in consumer spending was not seen as the start of an upward trend.

“Household wealth continues to fall rapidly, employment is falling steeply and consumer sentiment is at or near all-time lows. These are not the ingredients of a consumer recovery,” said Nigel Gault, chief U.S. economist at IHS Global Insight.

In other economic news, the Institute for Supply Management’s closely watched gauge of manufacturing activity showed contraction for a 13th straight month in February. The reading of 35.8 was up slightly from the prior month, but the index remains at levels signaling a severe recession.

And manufacturing layoffs persist. Steel alloys and bearings maker Timken Co. said Monday it planned to cut 400 salaried jobs, about 2 percent of its work force, as the Canton, Ohio-based company reduces costs to match a slowing market for its products.

A third report showed that construction spending plunged more than twice as much as expected in January, a decline of 3.3 percent that was the fourth straight monthly drop. Residential construction, where the economy’s troubles began more than two years ago, dropped 2.9 percent while nonresidential construction fell 4.3 percent, the biggest decline since January 1994.

The January increase in consumer spending, which followed six straight declines, was driven by a sharp rise in food and other nondurable goods as retailers offered big discounts to clear shelves following a dismal holiday shopping season. Durable goods posted a much smaller gain as Americans again avoided spending on cars and other large items.

The economic weakness is keeping a lid on inflation. A price gauge tied to consumer spending showed a modest increase of 0.2 percent in January after three straight monthly declines that reflected sharp drops in energy costs. Excluding food and energy, the price gauge rose 0.1 percent in January and has risen only 1.6 percent in the last 12 months.

But the new year has brought little relief for retailers. J. Crew Group last week announced that it was cutting 95 jobs and suspending its 401 (k) plan through the rest of the year as part of an effort to contain costs. Macy’s Inc. and J.C. Penney Co. last month each reported a drop of more than 50 percent in fourth-quarter earnings.

Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.