Employers slash jobs in Dec, pressuring Obama

WASHINGTON (Reuters) - U.S. employers cut 85,000 jobs in December, confounding expectations the labor market was finally stabilizing and piling pressure on President Barack Obama to spur job growth.

Eric Lipps, 52, waits in line to enter the NYCHires Job Fair in New York December 9, 2009. REUTERS/Shannon Stapleton

The jobless rate held steady at 10 percent, the Labor Department said on Friday, but it would have marched higher if a surprisingly large number of discouraged jobseekers had not left the labor force.

November payrolls were revised to show the economy actually added 4,000 jobs rather than losing 11,000, as initially reported, breaking a streak of 22 consecutive monthly losses. With revisions to October, however, the economy lost 1,000 more jobs than previously estimated over those two months.

Unemployment remains the Achilles heel of the economy’s recovery from its worst recession in 70 years, with job creation critical to sustaining the recovery when government stimulus fades.

“The jobs numbers ... are a reminder that the road to recovery is never straight. What this underscores, though, is that we have to continue to explore every avenue to accelerate the return to hiring,” Obama said, announcing new investments in clean energy.

Economists had expected a flat reading for payrolls, with the unemployment rate ticking up to 10.1 percent.

U.S. stocks rose, while government bond prices climbed and short-term interest rate futures gained as investors bet the weak jobs market would keep inflation tame and encourage the Federal Reserve to keep lending rates near zero for a long time.

Two Fed officials said on Friday they would like to see the nation’s jobs picture improve before the U.S. central bank withdraws extraordinary support for the economy and markets.

Citing the continued gains in temporary help, seen as a precursor to permanent hiring, analysts argued the data suggested a broad trend toward a labor market recovery was intact.

The cold weather might have partially contributed to the surprise drop in payrolls, some said. Construction employment fell last month, with manufacturing seeing a drop as well.

“We believe there will be a break into positive job growth sometime in the first quarter and the unemployment rate is close to its peak. The (economic) recovery is gaining speed,” said Michelle Meyer, an economist at Barclays Capital in New York.

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In a separate report, the Commerce Department said wholesale inventories grew at the fastest rate in over five years in November and sales climbed strongly, implying businesses were preparing for a healthier economy.

Economic bellwether United Parcel Service Inc raised its fourth-quarter profit forecast on Friday, a step analysts said reflected improved shipping volume and economic recovery. However it will cut 1,800 jobs.


High unemployment is one of the toughest domestic challenges facing Obama. The administration’s success in getting people back to work will shape prospects for Obama’s political future.


For a graphic on U.S. nonfarm payroll trends see:

For a graphic on the U.S. jobless rate over the last two years, see: here

For a graphic on U.S. unemployment trends, see: here


Obama’s popularity has steadily fallen, knocking his approval ratings down to around 50 percent. This could dim the election prospects for his Democratic Party in the November congressional elections.

Republicans said the steep fall in payrolls last month was evidence Obama’s policies were not working.

The scourge of high unemployment is not only confined to the United States. Euro zone unemployment rate jumped to an 11-year high in November, and is likely to rise more in the coming year, data showed on Friday.

The U.S. economy shed 4.2 million jobs for the whole of 2009, according to the Labor Department’s survey of employers.

The department’s survey of households offered an even gloomier assessment of the job market, showing 661,000 people left the work force last month.

The report showed there were 929,000 “discouraged workers” who had given up looking for a job, up from 642,000 a year earlier. Chris Rupkey, an economist with Bank of Tokyo-Mitsubishi, called the rise in discouraged workers “a simply astonishing number that borders on the frightening.”

“If they were still looking for work and counted as the unemployed, the unemployment rate would have been 10.5 percent,” he said. “This clearly isn’t your father’s recession. It is looking more like your great-grandfather’s. Brother, can you spare a dime?”

The broadest measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, rose to 17.3 percent from 17.2 percent in the prior month.

Still, the payrolls report, which is viewed by most economists as the more reliable gauge of the labor market’s health, showed pockets of strength.

Professional and business services added 50,000 positions, while education and health services increased payrolls by 35,000. Temporary help employment rose 47,000, continuing an upward trend that shows a reluctance among employers to hire full-time workers but suggests they may need to soon.

The average workweek was unchanged at 33.2 hours, while average hourly earnings edged up three cents to $18.80.

Additional reporting by Alister Bull, Glenn Somerville and Emily Kaiser