German and U.S. job woes mount

NEW YORK/LONDON (Reuters) - Global job woes worsened on Wednesday on bleak employment data from the United States and Germany, while microchip giant Intel Corp warned yet again that slack demand for computers would hurt its revenue.

Intel's announcement that fourth-quarter revenue would likely fall 23 percent followed news from British retailer Marks & Spencer that it would begin cutting jobs.

That was further bad news just a day after aluminum maker Alcoa said it would slash more than 15,000 jobs and U.S.-Dutch petrochemicals maker LyondellBasell filed for bankruptcy protection for its U.S. operations.

Meanwhile, the Bank of England is expected to cut rates by 50 basis points to a record low of 1.5 percent on Thursday, according to economists polled by Reuters. And yet another business scandal surfaced -- this one in India.

A report by ADP Employer Services said U.S. private employers shed 693,000 jobs in December, up sharply from the 476,000 jobs lost in November and far more than economists had forecast.

The figures suggest the U.S. government's more comprehensive non-farm payrolls report, due on Friday, will show a loss of about 670,000 jobs, said Joel Prakken, chairman of Macroeconomic Advisers, which jointly developed the report.

The U.S. employment numbers had been expected to show half a million jobs were lost in December, pushing the 2008 total above 2.4 million.

Former U.S. Labor Secretary Robert Reich cautioned that if the U.S. Congress does not pass an economic stimulus plan soon the country will lose another 3 million jobs in 2009.

"Unemployment will rise to 10 percent of the workforce by the end of this year," said Reich, adding that "without federal action, next year could be even worse.

In Germany, unemployment rose in December -- the first rise since February 2006 -- bringing to an end a three-year labor market boom as the global financial crisis hits companies in Europe's largest economy.

Up by a bigger-than-expected 18,000 in seasonally adjusted terms, the jobless figures come as German lawmakers work on a second stimulus package expected next week that could total 50 billion euros ($67 billion).

Germany's ruling coalition is also discussing support measures worth up to 100 billion euros for firms in financial trouble, the Financial Times Deutschland newspaper reported.

CORPORATE SLUMP

Intel blamed its revenue forecast cut -- the second since November -- on weak demand for personal computers, and its shares fell 6 percent, pulling U.S. stock markets lower.

U.S. consumer demand, the engine of the world's largest economy, is likely to remain weak well into 2009 as households put away their credit cards and concentrate on saving money amid the nation's deepest recession in decades.

Just how bad the fourth quarter was will be revealed next week as Alcoa kicks off the U.S. earnings season. Biotechnology giant Genentech Inc will also report, giving investors a first glimpse of the health of the health care sector.

Kansas City Federal Reserve President Thomas Hoenig said on Wednesday that the picture for the U.S. economy is "grim" through at least the first half of the year.

Marks & Spencer said more than 1,200 jobs would go after quarterly sales fell 7.1 percent at the 125-year-old clothing, food and housewares group.

"We expect challenging economic conditions to continue for at least the next 12 months," said Chairman Stuart Rose.

Also on Wednesday, U.S. media giant Time Warner Inc said it would take a charge of $25 billion for writedowns, No. 6 U.S. airline US Airways warned it would post a loss for 2008, and online travel agency Orbitz Worldwide announced new cost cuts.

NEW CORPORATE SCANDAL

In what is being called India's Enron, the head of outsourcing company Satyam Computer Services resigned on Wednesday, disclosing that profits had been falsely inflated for years.

The news dragged Satyam shares nearly 80 percent lower and sent Indian equity markets into a tailspin. Bombay's main index tumbled 7.3 percent amid fears the scandal threatens foreign investment in Asia's third-largest economy.

Euro zone producer prices released on Wednesday showed a record monthly fall in November on a sharp drop in energy costs, firming the case for a deep European Central Bank (ECB) interest rate cut next week.

Prices at factory gates in the 15 countries using the euro currency fell 1.9 percent from October, their biggest fall since Eurostat's PPI records began in 1981.

Oil prices slid 12 percent on Wednesday, the largest percentage drop in seven years, after a U.S. government report showed crude inventories swelled by 6.7 million barrels, more than seven times the increase analysts had expected.

The U.S. dollar slumped, reversing sharp gains against the euro and yen earlier this week, as steep job losses in the private sector rekindled fears of a prolonged U.S. recession.

Japan provided one bright spot as shares there sustained a New Year's rally, ending up 1.7 percent, but the U.S. and European markets fell.

The Dow Jones industrial average slid 2.7 percent, while the FTSEurofirst 300 index of top European companies closed down 1.3 percent.

Adding to Europe's gloom was a dispute between Russia and Ukraine that reduced Russian natural gas supplies for homes and factories in southeast Europe.

($1=.7425 Euro)

(Additional reporting by Reuters bureaux; Editing by David Cowell, John Wallace and Bernard Orr)