Friday January 9, 08:28 PM
US unemployment surges to 7.2 pct, 524,000 jobs lost
By Rob Lever
WASHINGTON (AFP) - US unemployment surged to a 16-year high of 7.2 percent as a deepening recession pushed employers to shed a massive 524,000 jobs in December, capping a yearly loss of 2.6 million, data showed Friday.
The staggering job losses in the monthly Labor Department employment report heightened a sense of urgency for president-elect Barack Obama and the new Congress to agree on a swift economic stimulus plan, analysts said.
"When you go through the details it was very bad," said Scott Brown, chief economist at Raymond James & Associates.
"It should light a fire under lawmakers to act quicker and bolder" on a stimulus, Brown added.
The job losses over the course of 2008 were the most in a year since 1945, the Labor Department said. Some 1.9 million were lost in the past four months alone as the credit crisis worsened.
The agency also revised up the number of job losses for the prior two months. The October figure was changed to show a loss of 423,000 jobs from 320,000 and November's data to a loss of 584,000 from 533,000.
The jobless rate, calculated on a separate household survey, climbed to 7.2 percent, the highest since January 1993, from 6.8 percent a month earlier.
The brutal acceleration of job losses suggested a vicious downward cycle for the world's biggest economy, analysts said.
The report "suggests that both the US economy and job market fell off a cliff" at the end of 2008, said Nariman Behravesh, chief economist at IHS Global Insight.
Behravesh said he expects "the jobs hemorrhage to continue through much of 2009" at a heavy pace and to ease if a large economic stimulus package can be enacted quickly.
"Nevertheless, the current pace of job losses means that the unemployment rate will rise into the 9.0 to 9.5 percent range at a minimum before leveling off," he said.
Yet some economists said the report showed the pace of job losses may have peaked as companies retrench and cut as much as possible.
"That scene wasn't as bloody as expected," said Jennifer Lee at BMO Capital Markets.
Some analysts had expected a far worse figure after a survey by payrolls firm ADP (Paris: FR0010340141 - news) showing the private sector lost 693,000 jobs in December.
"The report is obviously terrible," said Cary Leahey, senior economist at Decision Economics.
"The only silver lining is that the pace of job declines is so severe that the market may conclude that the pace of adjustment will slow in the first quarter," he said.
John Ryding at RDQ Economics said the report "adds to the pressure to upsize the package" of economic stimulus being prepared by Obama.
Senate majority leader Harry Reid said lawmakers need to move quickly on a plan to revive the economy.
"If anyone needed more evidence of how urgently we must pass an economic recovery plan that creates jobs, invests in America and puts the middle class first, you need to look no further than today's staggering job loss numbers," Reid said in a statement.
Obama said the dismal report highlights a "dire" situation and "demands urgent and immediate action."
He said consultations with Congress and his transition team on his multibillion-dollar American Recovery and Reinvestment Plan has "made good progress."
The number of job losses was roughly in line with forecasts but the unemployment rate rose above the consensus estimate of 7.0 percent.
The number of unemployed rose to 11.1 million in December, the data showed.
The figures come as the US economy is gripped by the worst recession in decades, which began in December 2007 after a collapse of a house bubble and massive financial sector losses that led to a credit crunch.
In December, a large portion of the losses came in manufacturing, which shed 149,000 in the month and 791,000 in the year, with the auto sector hard hit.
But the service sector, which accounts for some 80 percent of employment, fared even worse, with 273,000 jobs lost in the month.
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