WASHINGTON — Layoffs are back, and that's bad news for the fragile economic recovery.

New applications for unemployment benefits hit a nine-month high last week — a spike that suggests private employers might shed jobs this month for the first time this year.

Workers are losing construction jobs in Georgia and manufacturing jobs in Indiana. Some of the layoffs are coming as stimulus money dries up and public works projects come to a halt. Government employees are being let go, too, as states and cities grapple with budget crises.

Without more jobs, consumers will not feel secure enough to spend much money, further slowing the economy. The grim outlook has economists lowering their estimates for growth in the second half of the year. And on Thursday it led to a sell-off on Wall Street led by investors worried that the United States could tumble back into recession.

"Today's news on the economy has been nothing but awful," Paul Ashworth, an economist at Capital Economics, wrote in a note to clients. "The recovery is clearly slowing."

The Labor Department said Thursday that initial claims for jobless benefits rose by 12,000 last week to 500,000 — the highest level since November and the third straight increase.

As the economy recovered from the worst downturn since the 1930s, jobless claims declined steadily from a peak of 651,000 in March 2009 to a low of 427,000 in July before rising steadily over the past six weeks. In a healthy economy, jobless claims usually drop below 400,000.

"This is obviously a disappointing number that shows ongoing weakness in the job market," said Robert Dye, senior economist at the PNC Financial Services Group.

Dye said claims showed a similar pattern in the last two recoveries, but eventually began to fall again. The current elevated level of claims is a sign that employers are reluctant to hire until the rebound is well under way.

The jobless report and a separate report showing that manufacturing activity in the mid-Atlantic declined in August sent stock markets tumbling. The Dow Jones industrial average closed down 144 points for the day. Interest rates dropped sharply as investors flocked to the safety of Treasury bonds.