Jobless rate spikes to 7.2% as Dec. payrolls plunge by 524,000 (USA Today)

By Barbara Hagenbaugh, USA TODAY

WASHINGTON — The unemployment rate jumped to 7.2% in December, the highest in nearly 16 years, as employers slashed the most jobs in 2008 since 1945, the government said Friday in a report that painted a grim picture of the U.S. job market.

The jobless rate was up from 6.8% in November. The increase brought the rate to the highest since January 1993, the Labor Department said. More than 11.1 million Americans were unemployed in December, up 3.6 million from when the recession began in December 2007 and the highest since June 1983.

Firms cut a seasonally adjusted 524,000 workers in December following a 584,000 reduction in November. Employers cut 2.065 million jobs in 2008, 1.9 million of those layoffs happened in the last four months of the year.

Economists say the number of unemployed will rise far higher before the job market stabilizes as the USA remains in what may be the longest and deepest recession in the post-war period.

IHS Global Insight chief economist Nariman Behravesh says he expects jobs to be lost through most of the year, but says the losses could ease if Congress acts soon.

"If a large fiscal stimulus package can be enacted quickly, then the pace of job losses in the second half of the year can be slowed and by early 2010 the prospects for the U.S. economy starting to create jobs again will be good," he says. "Nevertheless, the current pace of job losses means that the unemployment rate will rise into the 9% to 9.5% range, at a minimum, before leveling off."

Some 13.5% of U.S. workers were either unemployed or underemployed in December. That adds in people who wanted full-time work, but were working part time, and those who had given up on finding work, who are not counted in the traditional unemployment rate. That was up from 12.6% in November and the highest since the records began 1994.

For those who did have jobs, there was some bad news, too. Employers cut hours for their existing, non-supervisory employees to 33.3 hours, the lowest since the government began tracking that number in 1964.

The drop in hours led average weekly earnings for hourly workers to fall $2 to $611.39 last month despite a small increase in the pay rate of 5 cents to $18.36 an hour.

The number of Americans who wanted to work full time but were working part time because they couldn't find full-time work or had their hours cut rose to 8 million, up 3.4 million from a year ago and the highest since those records began in 1972. Since that time, the labor force has grown as well.

Unemployment rates rose broadly, across all age groups, races, sexes and education levels. Job cuts were seen across a wide range of industries in December, including:

  • Construction companies cut 101,000 jobs. Since peaking in September 2006, construction firms have cut 899,000 workers.
  • Manufacturing firms cut 149,000, the 30th consecutive monthly drop.
  • Retailers cut 66,600 workers, with nearly a third of those jobs cut at automobile dealerships.
  • Companies in the leisure and hospitality sector cut 22,000 jobs, with most of the losses seen at restaurants and bars.
  • Trucking firms cut 15,600 jobs.
  • Firms in the financial industry cut 14,000 workers.

There were a few positives. Firms in the education and health services sector added 45,000 workers while state and local governments added 9,000 jobs.