Yearly Job Loss Worst Since 1945
January 10, 2009

The worsening U.S. economy hit the nation's work force hard in December, as the unemployment rate climbed to 7.2% and brought the total number of jobs lost last year to just over 2.5 million -- the most since 1945.

Of those, 1.9 million vanished in just the final four months of the year.

Job losses spared no region or sector, except for small increases in education and health-care services and government employment. The U.S. lost 524,000 jobs in December, the Labor Department said Friday. Financial markets sank on the news, with the Dow Jones Industrial Average falling 143.28 points, or 1.64%, to close at 8,599.18 on Friday.

The numbers drew alarm from President-elect Barack Obama, who cited the report to rev up support for his stimulus program. The Obama economic team has begun to worry that opposition in Congress to parts of his plan could cause delays. "Clearly, the situation is dire," Mr. Obama said. "What we can't do is drag this out when we just saw a half-million jobs lost."

Many Americans have been out of work for months and are resorting to lower-wage or part-time jobs to make ends meet. Long-term unemployment is a worsening problem; the Labor Department reported that the number of workers out of a job for more than 27 weeks doubled last year.

Dana Stevens, 32, of West Deptford, N.J., lost her position as a human-resources supervisor at an insurance brokerage in July after just a year on the job. Despite applying for hundreds of positions in recent months, she is still looking. Most companies lose interest when they learn she earned $60,000 a year, Ms. Stevens said, with one company telling her its maximum salary for a job requiring similar experience is now $40,000.

"I came home and cried," said Ms. Stevens, who is struggling to pay a $2,400 monthly mortgage with her husband. "My savings is gone. This has probably been the worst experience of my life."

While the official unemployment rate is 7.2%, a different figure that includes discouraged workers who have dropped out of the labor force and those working part-time because they can't find full-time work hit 13.5% in December. That was nearly a full percentage point higher than in the previous month and up from 8.7% at the end of 2007. Meanwhile, the number of Americans collecting unemployment benefits has risen since the employment survey was conducted in the second week of December, hitting a fresh 26-year high in the closing days of 2008.

The U.S. economy appears to have contracted at the sharpest pace in a quarter-century during the October-through-December period, which most economists predict will be the trough of the current recession. J.P. Morgan chief economist Bruce Kasman on Friday estimated that U.S. gross domestic product declined at a 6% annualized rate in the fourth quarter, following a 0.5% drop in the July-September quarter.

"What I think is most striking about the jobs lost in the U.S. is its breadth," he said in a conference call. "Businesses are pulling back hard."

Manufacturing, often a bellwether for the U.S. economy, shed 149,000 jobs in December, the most since 2001. The long-resilient service sector also showed considerable weakness, in retail, hospitality and professional services.

The U.S. hasn't shed so many jobs in a year since the nation was shifting from a wartime to a peacetime economy after World War II. The population then was less than half its current size.

A key gauge of future employment also looked grim in December as the average workweek fell to 33.3 hours, the lowest since the government began tracking the data in 1964. "At 33.3 hours, we're expecting several more months of at least half a million cuts in payrolls," said Bernard Baumohl, managing director of The Economic Outlook Group in Princeton, N.J.

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A wave of layoff announcements in the first full week of 2009 portends as much. This week alone brought layoff announcements from retailers Walgreen Co. and Macy's Inc., health insurer Cigna Corp., aluminum maker Alcoa Inc. and airplane manufacturer Boeing Co.

On Monday, Linda Balogh, 42, was laid off from a General Motors Corp. plant in Lordstown, Ohio. Ms. Balogh, who worked as a data response technician checking cars as they came off the assembly line, started sending out résumés last month.

"The economy here is really slouched right now. Everyone is cutting jobs. There's no 'help wanted' signs," she said. Ms. Balogh said about 2,000 of her former co-workers will be laid off this month as the plant, which makes the Chevy Cobalt, shuts down a shift and slows production to 46 cars an hour from 72.

Her family is cutting back on eating out and on trips to a skating rink that her daughter enjoys. "There's no dispensable income to do those things," said Ms. Balogh.

How to provide short-term relief to people like her and stimulate long-term economic activity form the heart of Congress's debate over Mr. Obama's proposed $775 billion stimulus program. About 40% of it would be in the form of tax cuts, with the rest directed at infrastructure and other spending projects aimed at job creation.

Congressional committee action on the stimulus package is expected to begin the week of Mr. Obama's Jan. 20 inaugural. House leaders are hoping for a floor vote in that chamber before the end of the month.

On Capitol Hill, House Speaker Nancy Pelosi (D., Calif.) seized on the jobs report to reiterate her commitment to passing stimulus legislation by mid-February, when Congress is scheduled to leave town at President's Day. "We need action now," she said.

But Ms. Pelosi and other party leaders are running into unexpected concern among rank-and-file Democrats with certain planks of the Obama plan, including a proposal to reward businesses with a special tax credit for creating jobs. Amid the rising concern, Mr. Obama dispatched top economic adviser Lawrence Summers on Friday to meet with House Democrats, a day after sending him to confer with restless Senate Democrats.

On Friday, Senate Minority Leader Mitch McConnell (R., Ky.) joined those raising concerns about this issue. In an interview, he urged that the package be focused on near-term stimulus and not used "to make systemic" changes to U.S. domestic policy. Among other things, he voiced concern about a proposal under consideration that would broaden the unemployment benefits program to cover part-time workers and others not currently eligible for assistance.

"Maybe they need to be done, but not in this package," Sen. McConnell said of the longer-term initiatives. "We need to be careful to target this package."

The new administration is counting on the anger of laid-off workers to translate into political support. "Any of these guys that want to buck this stimulus plan might as well wear T-shirts to Congress that say, 'Don't re-elect me,' " said Steven Riggs, who was a project manager at an architectural firm in Ohio until he was laid off in October. On Thursday, his wife, who worked at an Eddie Bauer warehouse, lost her job, too.

Write to Kelly Evans at and Kris Maher at

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