Washington ? Pounded by a fierce financial crisis, the country is sinking deeper into economic despair and is likely to be in the hole well into next year, forcing more Americans into the ranks of the unemployed.

The gloomy outlook from the Federal Reserve came as hopes dimmed that Congress could secure a fresh $25 billion rescue package for the tottering U.S. auto industry before lawmakers quit for the year.

With economic troubles cutting into customers’ appetites, businesses will remain in a cost-cutting mode, keeping layoffs high.

Although economists predict a government report out Thursday will show that the number of newly laid-off workers filing applications for unemployment benefits last week dipped to 505,000, that figure would still point to an ailing jobs market, they say.

In the prior week, new applications filed for jobless benefits zoomed to 516,000, the most since right after the September 2001 terror attacks.