2008 US Job Losses Most In 64 Years, Unemployment Rate Surges To 7.2%

The U.S. unemployment rate rose to 7.2% in December, an indication that the recession intensified and will no doubt drag on well into the new year as consumers and businesses continue to cut back.

The U.S. economy lost 2.6 million jobs last year, the most since World War II ended in 1945, the Labor Department reported today (Friday). Nearly two million of those losses came in the final four months of the year, and 524,000 jobs were shed in December alone.

Factory payrolls shrank by 149,000, retailers lost 66,000 employees, and the service industry shed 273,000 workers. Payrolls at builders shrank by 101,000.

The health care and education sectors provided a few bright spots, adding a combined 45,000 jobs. The government added another 7,000 employees.

The unemployment rate climbed to 7.2% - the highest level since January 1993 - and will likely exceed 8% by the end of the year, according to most analysts’ estimates.

“We’re seeing pretty ugly numbers as the recession is worsening,” Michael Gregory, a senior economist at BMO Capital Markets, told Bloomberg News.  “It’s going to be devastating in terms of consumer confidence and spending. The next couple of months will be dismal.

The mounting job losses threaten to pull the economy into a self-sustaining cycle of rising unemployment and declining consumer spending.

“Rising unemployment, the declines in stock market wealth, low levels of consumer sentiment, weakened household balance sheets, and restrictive credit conditions were likely to continue to hinder household spending over the near term,” the U.S. Federal Reserve said in the minutes of its Dec. 15 - Dec. 16 meeting.

“Amid the weaker outlook for economic activity over the next year, the unemployment rate was likely to rise significantly into 2010,” The Fed said.

After declining at an annual rate of 0.5% in the third quarter, gross domestic product (GDP) probably contracted by 5% or more in the fourth quarter of 2008, The Wall Street Journal reported.

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