December non-farm payrolls seen down 550,000

NEW YORK (Reuters) - The economy probably lost more than half a million workers last month, pushing the unemployment rate up to 7.0 percent as it cut jobs in 2008 at the highest rate since the demobilization after World War Two.

Economists polled by Reuters expect non-farm payrolls to register a drop of 550,000 jobs for December, which would make it the worst single month of job losses in 34 years.

The economy lost 533,000 jobs in November, for a total of 1.9 million for the 11 months starting in January 2008. Economists expect the unemployment rate to rise to a 15-year high of 7.0 percent from November's 6.7 percent, according to the median of their forecasts.

If economists' forecasts for December prove correct, 2008 will be the biggest year of payroll losses since 1945, when the economy cut 2.75 million jobs as it switched gears from a war economy to peace time.

The 63 forecasts in the Reuters poll ranged from a loss of 750,000 jobs to a decline of 400,000 in payrolls.

In forecasting the December numbers, some economists increased their original estimates of employment losses after a report on Wednesday showed the private sector shed far more jobs than expected.

Private employers shed 693,000 jobs in December, up sharply from 476,000 cut in November, the report by ADP Employer Services showed.

Before the ADP report, economists' median forecast was for 500,000 losses in the non-farm payrolls report, which is more comprehensive than the ADP data because it factors in government employment as well as the private sector.

The median forecast for the December unemployment rate was unchanged at 7.0 percent.

However, many analysts note that the December ADP report was based on a new methodology. Though it was designed to mirror the payrolls report more closely than before, its accuracy is still unproven.

The payrolls report is due at 8:30 a.m. on Friday.

The following is a selection of analysts' forecasts and comments:

ACTION ECONOMICS

Forecasts: December non-farm payrolls -480,000

December unemployment rate 7.1 pct

"The U.S. ADP figure of -693,000 for December suggests substantial downside risk to our -480,000 nonfarm payroll estimate, which is consistent with a -495,000 private payroll reading.