Published January 10, 2009

Latest US Data
Jobless rate rises to 16-year high

524,000 jobs lost in December - and 2.6m in the whole of last year, the most since 1945

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(Washington)

THE US unemployment rate bolted to 7.2 per cent in December, the highest level in 16 years, as nervous employers slashed 524,000 jobs. The labour market is expected to remain weak as mass layoffs continue.

The Labor Department's report, released yesterday, underscored the terrible toll the deepening recession is having on workers and companies, and highlights the hard task President-elect Barack Obama faces in resuscitating the flat-lined economy.

For all of 2008, the economy lost a net total of 2.6 million jobs. That was the most since 1945, when nearly 2.8 million jobs were lost. Although the number of jobs in the United States has more than tripled since then, losses of this magnitude are still being painfully felt.

With employers throttling back hiring, the nation's jobless rate averaged 5.8 per cent last year. That was up sharply from 4.6 per cent in 2007 and was the highest since 2003.

Although economists were forecasting even more payroll reductions in December - around 550,000 - job losses in both October and November turned out to be deeper than previously estimated. Revised figures showed that the employers slashed 584,000 positions in November and another 423,000 in October.



The unemployment rate, meanwhile, rose from 6.8 per cent in November, to 7.2 per cent last month, the highest since January 1993. Economists were expecting the jobless rate to rise to 7 per cent.

'This is a very dismal report. This paints a much worse picture in 2008 than we had thought. This doesn't bode well for first-quarter unemployment. This is one of the most significant downward quarters for jobs in post-World War history,' said Lindsey Piegza, market analyst at FTN Financial in New York.

Job losses were widespread in December. Construction companies slashed 101,000, factories axed a whopping 149,000 jobs and similarly dire numbers were seen elsewhere, far outstripping gains in education, health care and government.

'The job situation is ugly and is going to get uglier. There's no reason to expect hiring anytime in the next three to six months. We are not going to see any hiring until the government steps in and acts. Talk doesn't work,' said Richard Yamarone, chief economist at Argus Research in New York.

Workers with jobs saw modest wage gains. Average hourly earnings rose to US$18.36 in December, up 0.3 per cent from the previous month. Economists were expecting a 0.2 per cent increase.

The US recession, which just entered its second year, is already the longest in a quarter-century, and is likely to stretch well into this year. The fact that the country is battling a housing collapse, a lock-up in lending and the worst financial crisis since the 1930s makes the current downturn especially dangerous.

Mr Obama, who takes over on Jan 20, is promoting a massive stimulus package that could swell to US$850 billion, his advisers say.

'I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible,' he said on Thursday. -- AP, Reuters