Jobless rate matches 8-year high

WASHINGTON -- The nation's unemployment rate soared to 6 percent in November, delivering what one analyst called a "cold, hard slap in the face" about a sagging economy that many thought had already hit bottom for job seekers.

The jobless rate, up from 5.7 percent a month earlier, matched an eight-year high set last April.

The increase was a hard blow, said Bill Cheney, chief economist at John Hancock Financial Services. "There was something psychologically comforting about unemployment staying below 6 percent," he said.

The Labor Department released the report Friday, less than an hour before word spread of a shake-up of President Bush's economic team. The White House, amid growing uneasiness about the ailing economy, requested the resignations of Treasury Secretary Paul O'Neill and chief economic adviser Larry Lindsey.

Bush advisers have been increasingly worried that the economy could hamper the president's re-election prospects.

Companies slashed 40,000 jobs last month, the most since February, when 165,000 jobs were cut, the report showed. Economists had forecast modest job growth.

The dismal report initially stung Wall Street, but it overcame anxiety in afternoon trading. The Dow Jones industrial average was up 22 points, the Nasdaq 11, at the close.

November's jobless rate was the same as in April, which had been the highest since July 1994 when it hit 6.1 percent.

Economists said the recovery, moving in fits and starts, is beginning to mirror that of the last recession, when Bush's father was president. High unemployment that failed to start dropping until almost two years later helped cost him a second term, which his son has vowed not to repeat.

"We are having a replay of the jobless recovery," said Ken Mayland, an economist with ClearView Economics. "I think that's going to continue." Escalating business expenses, notably medical care and pension costs, are forcing companies to "keep their head count down," he said.

Analysts had thought the unemployment rate might tick up to 5.8 percent for November, with stabilizing layoffs and fewer workers seeking unemployment benefits in recent weeks.

That created optimism for the holiday shopping season, a hope that workers would be lining up at cash registers rather than at unemployment offices.

Consumer spending amounts to two-thirds of all economic activity in the United States and has been the main force keeping the economic recovery more-or-less on track. November's sales were modest, and people worried about job security are expected to be frugal.

"The labor market remains weak," said Paul Kasriel, chief domestic economist at the Northern Trust Co. "Unfortunately, I don't see much on the horizon that's going to strengthen it."

The rate is expected to rise in coming months to as high as 6.5 percent. The number of people out of work for 27 weeks or more rose by 78,000 to 1.7 million last month. Nearly 1 million people will start running out of unemployment benefits three days after Christmas, because Congress failed to extend the payments before adjourning last month.

"Clearly the economy is still on the sick bed requiring some more treatment," said Sung Won Sohn, chief economist at Wells Fargo. "We are not out of the woods yet by any means."

The economy isn't growing fast enough to create new jobs needed to absorb a growing pool of people looking for work. Analysts said the unemployment rate probably should have been estimated higher in previous months to reflect that.

The report showed that employment in the nation's factories continued to decline, with a loss of 45,000 jobs in that sector alone last month. Hiring also was down in retail, mostly because of weak employment at a time when stores typically staff up for the holiday shopping rush. Jobs also were cut in the communications industry.

Countering those job losses was an overall hiring increase in services. The health care industry accounted for more than half of the November increase, with notable gains in hospitals and nursing facilities.

Employment in temporary personnel firms, an industry in which hiring had been on the upswing for much of the year, fell for the second month in a row. Such employment is closely watched by economists because companies often seek temporary help as their businesses start growing again.

Other major industries showed little change last month, including construction, transportation and government, which had a large gain in October.

The Federal Reserve tried to energize the recovery last month by cutting a key interest rate by a bold half a percentage point. The reduction to a 41-year low of 1.25 percent marked the first cut this year and the 12th since January 2001. Analysts think the Fed will hold rates at that low level at its meeting Tuesday.

Economists also are looking for the Bush administration to press a Republican-controlled Congress next year for an economic stimulus package that would include tax cuts for businesses, which would be designed to help perk up the economy.

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On the Net

Jobless report: http://www.bls.gov/