Jobless rate reaches 2-year high
Published: Saturday, January 5, 2008 at 6:01 a.m.
Last Modified: Saturday, January 5, 2008 at 12:00 a.m.
WASHINGTON - Wary employers clamped down on hiring and pushed the unemployment rate to a two-year high of 5 percent in December, an ominous sign that the economy may slide into recession. President Bush explored a rescue package, including a tax cut, with his economic advisers.
Gripped by uncertainty, government and private employers last month added the fewest new jobs to their payrolls in more than four years. In fact, employment at private companies alone actually declined. The Labor Department's report, released Friday, provided evidence of an economy greatly strained by a housing slump and a credit crunch.
The disappointing employment figures sent Wall Street into a nosedive, thrust the White House into damage control and ratcheted up the blame game as Republicans and Democrats battle for the presidency. The employment numbers also sparked expectations that the Federal Reserve will lower interest rates again. As expected, the Fed took action to make cash more available to banks.
Bush said he is on top of the situation. "We can't take economic growth for granted," he said. "There are signs that will cause us to be ever more diligent and make sure that good policies come out of Washington."
The president said he wants to work with Congress "to deal with the economic realities of the moment and to assure the American people that we will do everything we can to make sure we remain a prosperous country."
With the odds of a recession increasing, Bush is weighing the need for an economic stimulation package. The president, who has been plagued by low public approval ratings for his handling of the economy, isn't expected to make any decisions until later this month. Tax cuts are under consideration, White House spokesman Tony Fratto said. "We've done tax cuts before and it's led to growth," he said.
The State of the Union address is Jan. 28 and Bush is likely to unveil his economic package then.
The civilian unemployment rate jumped from 4.7 percent in November to 5 percent in December, the highest since November 2005 after the Gulf Coast hurricanes dealt the country a mighty blow. Total payrolls - both private employers and government - grew by just 18,000 last month, the worst showing since August 2003, when the economy suffered job losses as it struggled to recover from the 2001 recession.
"This is a major warning shot that the economy is in trouble," said economist Joel Naroff, president of Naroff Economic Advisors.
On Wall Street, the stocks tumbled. The Dow Jones industrials were down more than 200 points in afternoon trading.
As part of its recently launched effort to make credit more readily available, the Federal Reserve announced it will provide banks an additional $60 billion worth of loans through two auctions on Jan. 14 and Jan. 28. The Fed's first two auctions offered banks a total of $40 billion in loans.
The December employment picture was much weaker than economists were expecting.
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