NEW YORK (Bloomberg) — Caterpillar Inc., the world's largest maker of bulldozers and excavators, said it's cutting 20,000 jobs and profit and sales will trail analysts' estimates this year because of the deepest recession in a quarter century.

The jobs include 12,000 employees, or 11 percent of the workforce, and 8,000 contractors, spokesman Jim Dugan said today. Peoria, Illinois-based Caterpillar's full-year earnings forecast missed the average estimate by 41 percent, and its shares dropped the most in eight weeks.

Demand evaporated and dealers cancelled orders in the fourth quarter after nine months of record sales, Caterpillar said in a statement. US builders broke ground last month on the fewest houses since record-keeping began 50 years ago, and stimulus plans like those from President Barack Obama may not be enough to counter the drop in private construction, the company said.

"The results were worse than we were even anticipating, and we had lowered our expectations considerably," Kristine Kubacki, a St. Louis-based analyst with Avondale Partners LLC, said in an interview. Comments about order cancellations in December "were particularly worrisome", she said.

Profit excluding some items may fall this year to $2.50 a share, less than the average estimate of $4.22 in a Bloomberg survey of 21 analysts, Caterpillar said. Sales may decline 22 percent to $40 billion, below the $46 billion estimate.

"We were whipsawed in the fourth quarter as key industries were hit by a rapidly deteriorating global economy and plunging commodity prices," chief executive officer Jim Owens, 63, said in the statement. "We expect 2009 will be the weakest year for economic growth in the postwar period."

Fourth-quarter net income fell almost a third to $661 million, or $1.08 a share, from $975 million, or $1.50, a year earlier. Analysts, on average, estimated earnings of $1.30 a share. Sales rose 6.4 percent to $12.9 billion, reflecting price increases and consolidation of Cat Japan sales into the parent.