Jobless Rate Jumps to 7.2% in December

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Time

The nation's unemployment rate bolted to 7.2% in December, the highest since early 1993, as nervous employers slashed 524,000 jobs.
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The Labor Department's report, released Friday, 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 U.S. 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% last year. That was up sharply from 4.6% 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% in November, to 7.2% last month, the highest since January 1993. Economists were expecting the jobless rate to rise to 7%.

Trying to survive a deepening recession, employers are cutting their work forces to the bone, leaving more Americans unemployed and with dim prospects of finding a new job any time soon. (See pictures of the global financial crisis).

Employers are chopping costs as they try to cope with dwindling appetite from customers in the United States as well as in other countries, which are struggling with their own economic problems.

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

All the problems have forced consumers and companies alike to retrench, feeding into a vicious cycle that Washington policymakers are finding difficult to break.

President-elect Barack Obama says a bold approach is needed to bust through this cycle and revive economy.

"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 Thursday.

"If nothing is done, this recession could linger," Obama warned. "The unemployment rate could reach double digits."

Obama, who takes over Jan. 20, is promoting a massive package of tax cuts and government spending that could total $775 billion over two years. With add-ons by lawmakers, the package could swell to $850 billion, his advisers say.

Even with a new government stimulus, the unemployment rate is expected to keep rising this year. Some think it could hit 9 percent or 10 percent at the end of this year.

This week alone, drugstore operator Walgreen Co., managed care provider Cigna Corp., aluminum producer Alcoa Inc., data-storage company EMC Corp. and computer products maker Logitech International all announced major layoffs to cope with the recession.