U.S. sheds more jobs, European industry slumps

By Matt Daily

NEW YORK (Reuters) - More than half a million Americans lost their jobs in December, making 2008 the worst year for U.S. employment since World War Two, while Europe's woes mounted as output from its factories plunged.

The U.S. unemployment rate jumped to a 16-year high of 7.2 percent in December as 524,000 people lost their jobs in the month, U.S. surveys showed. That brought the number of jobs lost in the world's largest economy in 2008 to some 2.6 million.

"The job situation is ugly and is going to get uglier," said Richard Yamarone, chief economist with Argus Research in New York. "There's no reason to expect hiring any time 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."

The U.S. job losses for December were fewer than analysts had expected, but stocks in the United States fell and European shares reversed earlier gains.

U.S. President-elect Barack Obama said the jobs data was a "stark reminder" of the need for speedy passage of a stimulus package.

"Clearly the situation is dire. It is deteriorating and it demands urgent and immediate action," Obama told a news conference.

Obama's economic team is working to overhaul the $700 billion rescue program to stem housing foreclosures, according to an aide. Half that money has already been spent, and many members of Congress have complained the earlier moves to shore up bank balance sheets have not eased credit for consumers.

Meanwhile, Boeing Co, the world's No. 2 plane maker, became the latest U.S. company to cut jobs, announcing it would shed 4,500 workers or 7 percent of the number in its commercial plane unit.

EUROPEAN SPIRAL

Germany, Britain, France, Spain and Sweden all reported collapsing factory output, with some posting the worst figures in many years, raising expectations that the European Central Bank would cut rates by half a percentage point to a record low of 2 percent next week.

Germany reported its biggest annual fall since 1993, dragged down by a downturn among manufacturers that is threatening to cause the worst recession in the country's post-war history.

Preliminary Economy Ministry figures showed output fell by 10 percent year-on-year as demand for cars and other capital goods faded across the globe.

"We're at the start of a really deep recession," said Juergen Michels, an economist at Citigroup in London.

Ireland's Finance Ministry warned the recession there would be its worst on record, and that the economy will not begin growing until 2011.

The U.S. Dow Jones Industrial average slipped 1.6 percent for its third consecutive downward move, while the pan-European FTSEurofirst 300 and Tokyo's Nikkei 225 index both dropped 0.5 percent.