The nation’s economy unexpectedly lost 101,000 jobs last month as retailers cut back on holiday hiring, the Labor Department said Friday in a report that provided fresh evidence of a jobless recovery. The unemployment rate remained unchanged at 6 percent, matching its highest level in eight years, although some analysts said it is likely to move higher in coming months.
THE DECEMBER PERFORMANCE MARKED the biggest monthly job loss in 10 months and surprised analysts, who thought the economy added about 37,000 jobs, according to the Economy.com consensus estimate. The department also revised previous estimates downward to show the economy lost 88,000 jobs in November, rather than the 40,000 previously reported.
Financial market reaction to the report was muted, partly because job losses were confined largely to the retail and manufacturing sectors, analysts said. Stock prices were mixed, and broad market indicators closed with a gain of about 2 percent for the first full trading week of the new year.
“For now it’s a weak, sluggish labor market, but we already knew that,” said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.
“We have reason to believe that outside these isolated areas the economy is not doing anything different from what it did before,” he said. “That’s what the market is saying.”
The disappointing labor report could add urgency to calls for fiscal stimulus from Congress, already gaining momentum after President Bush unveiled a larger-than-expected plan to inject $674 billion to the economy over 10 years, mostly through tax cuts.
“President Bush could not have asked for a better endorsement for his tax cut proposal than this report,” said Ken Mayland, president of ClearView Economics in Cleveland, Ohio. “This news should light a fire under Congress.”
Although the manufacturing sector shed 65,000 jobs last month, total hours worked actually rose by 0.4 percent, suggesting that factory managers opted to squeeze additional production from their remaining workers. That is consistent with a monthly survey released last week that indicated an upturn in the hard-hit manufacturing sector.
The nation’s retailers, which typically boost payrolls in December to handle the crunch of the holiday shopping season, shed 104,000 jobs. The struggling airline industry drove job losses in the transportation industry, which hemorrhaged 23,000 jobs last month.
Analysts said seasonal adjustment factors may be making the monthly labor figures more volatile than usual. Because retailers hired fewer workers than expected in December, there should be fewer seasonal layoffs in January, so total employment might bounce back in the next report, said Sung Won Sohn, chief economist of Wells Fargo.
Nevertheless, he said consumer spending appears to be “petering out” yet businesses have not yet picked up the slack through increased investment, meaning the labor market could remain persistently flat.
Although the unemployment rate has surged from 3.9 percent in late 2000, it remains well below the peak level of 7.8 percent hit in 1992, when another jobless recovery figured heavily in the re-election defeat of Bush’s father. But the current labor market is arguably weaker than it was a decade ago, said economist Jay Feldman of Credit Suisse First Boston.
Assuming that the recession that began in March 2001 technically ended in November 2001, the number of people on company payrolls fell by 0.8 percent in the first year of the expansion, he said. That compares with a payroll loss of 0.4 percent in the first year after the 1990-91 recession. In previous expansions the labor force generally expanded by 2 to 3 percent in the first year after a recession as demand and production snapped back from reduced levels.
Dean Baker of the liberal Center for Economic and Policy Research pointed out that the economy has lost nearly 1.7 million jobs since January 2001, and the private sector has lost nearly 2.4 million jobs.
“This report shows an economy that is sliding back into recession,” he said.
Most mainstream economists consider that an overstatement, although the consensus forecast is for another year of very modest growth, similar to 2002. And in fact the National Bureau of Economic Research, recognized as the arbiter of business cycles, has not formally declared when and whether the latest recession ended.
The ailing economy has shown no consistent signs of a strong recovery. In fact, economists are bracing job seekers for more bad news in the months ahead and a jobless rate that could rise to 6.5 percent by summer.
Facing the potential political damage, Bush and the new Republican-controlled Congress quickly pushed through a federal extension of emergency unemployment benefits this week as lawmakers returned for a new session.
Bush also announced as part of his fiscal stimulus program a $3.6 billion his plan to create “re-employment accounts” of up to $3,000 for jobless workers.
White spokesman Ari Fleischer said the president is “very concerned” about U.S. job losses and urges Congress to pass his tax cut plan.
“The president views this morning’s data as another reason for Democrats and Republicans to work together to get something done,” Fleischer added.
The Associated Press and Reuters contributed to this report.