INSTANT VIEW: Employers cut 524,000 jobs in December

NEW YORK (Reuters) - Employers slashed payrolls by 524,000 in December, driving the unemployment rate to its highest level in almost 16 years, a government report showed on Friday, suggesting that the year-long recession was deepening.

KEY POINTS: * The Labor Department said the national unemployment rate rose to 7.2 percent in December, the highest level since January 1993. The jobless rate was 6.8 percent in November. * Analysts polled by Reuters predicted a reduction of 550,000 jobs in December. * 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 U.S. nonfarm payrolls in the four months through December was 1.9 million.

COMMENTS:

CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK:

"You got a short rally in the two-year Treasury note which is not unexpected given the jump in the unemployment rate.

The first quarter decline in GDP could be worse than the fourth quarter which is bullish for Treasuries, but could be quite averse for equity prices today and in the future. Now equities may take the attitude that they did last month that things can't get any worse, but unfortunately the drop in average hours worked in this employment report suggests that the first quarter is going to be very, very weak.

"The implication for fiscal policy is that Obama, rather than low-balling the stimulus package at $750 billion, may ask for a larger package and settle on $800 billion. Reality has set in on the Obama plan. The Republicans felt it didn't have enough tax cuts so he hinted at sizable corporate income tax cuts. But at the same time the Democrats are concerned that the tax cuts may not work quickly enough or may not work at all and they want shovel-ready public works projects and aid to state and local governments."

MICHAEL STRAUSS, CHIEF ECONOMIST, COMMONFUND, WILTON,

CONNECTICUT:

"It tells us what we knew ahead of time: it's a serious recession. The economic numbers are going to get worse before they get better. It fits in line with the notion of about a 6 percent hit to GDP. The data unfortunately does fit in line with the weakness that we've seen in other statistics.

"All of these (numbers) point to a very significant recession. Does the Fed recognize that? Yes. Is the Fed doing things to address that? Yes. Does our new administration that. Yes. Did our old administration fully recognize that? No.

"Does the market react to today's numbers or does it react to what today's numbers will mean for fiscal monetary stimulus and how conditions might change six to nine months from now. And that's the going to be the tug of war today.

"But there's no surprise in this data, unfortunately. It's one where it was expected to show widespread weakness. And unfortunately it does."

ARPITHA BYKERE, LEAD ANALYST, RGEMONITOR.COM, NEW YORK:

"These numbers are to be expected given the recession and the sharp contraction in consumer spending we have seen. We expect these kinds of job losses to continue in the first part of 2009 with between 500,0000 to 600,000 jobs lost in each of the first few months of 2009. We expect the unemployment rate to reach 8 percent by mid-2009. The recession was severe in the fourth quarter of 2008 and will be severe in the first quarter of 2009, but so far fiscal stimulus has been absent. The fiscal stimulus will probably come only starting in the second quarter of 2009 which is a very big delay. The economy requires a very large fiscal stimulus this year -- at least in the $700 billion to $800 billion dollar range."

WILLIAM SULLIVAN, CHIEF ECONOMIST AT JVB FINANCIAL GROUP IN