The United States unemployment rate surged to its highest level in nearly 16 years in December as a deepening economic slump forced companies to slash payrolls by more than half a million jobs.
The Labour Department said on Friday the national unemployment rate rose to 7,2% in December, the highest level since January 1993, beating analysts forecast for a reading of 7%. The jobless rate was 6,8% in November.
In December, US employers cut payrolls by 524 000, somewhat less than analysts’ prediction for a 550 000 reduction in jobs. Total job losses for 2008 were 2,6-million, the largest decline since a 2,75-million drop in 1945.
”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 most significant downward quarters for jobs in post-World War history,” said Lindsey Piegza, market analyst at FTN Financial in New York.
US stock index futures turned higher amid relief the decline in payrolls was not even more dramatic.
The pace of job losses is adding to fears the economic recession that started in December 2007 may prove to be the longest since a 1981 slump that lasted 16 months. It also underscores the urgent need for a massive fiscal stimulus to salvage the economy.
The collapse of the US housing market and the resulting financial crisis have triggered the worst financial environment since the Great Depression of the 1930s.
November’s job losses were revised to show a cut of 584 000, previously reported as a 533 000 loss, while October’s losses were revised to 423 000 from a decline of 320 000.
With those revisions, the total reduction in US non-farm payrolls in the four months through December was 1,9-million.
”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.
The Federal Reserve has cut benchmark interest rates to near zero to improve financial market liquidity and bolster economic growth while the incoming administration of president-elect Barack Obama has pledged to enact a massive fiscal stimulus package.
The largest number of job losses in December was in services-providing businesses, which shed 273 000 jobs.
Weekly hours of work fell slightly to 33,3 in December from 33,5 in November, as employers reduced schedules. — Reuters