Lawmakers talk economic stimulus after jobless rate rises

WASHINGTON -- The worsening jobs picture has the White House accelerating talk about a possible economic stimulus package and puts increased pressure on the Federal Reserve to further cut interest rates to boost consumer and business activity.

Though some economists doubt that new tax cuts or spending could be enacted quickly enough to do much good, Democrats in Congress also stepped up calls for robust action as the economy appeared to veer closer to a recession.

"Today's job numbers should be a wake-up call that a public policy response is needed to help the economy recover more quickly and to help average Americans deal with any downturn," said House Financial Services Chairman Barney Frank, D-Mass.

The Labor Department said Friday that the unemployment rate jumped to 5% in December from 4.7% in November. The jobs gain of 18,000 last month was the smallest in four years.

Most of the jobs lost were centered in construction and manufacturing. While the construction losses were expected given the sharp housing downturn, some economists were especially concerned that manufacturing was doing so poorly.

Factories shed 31,000 manufacturing jobs in December, and a total of 212,000 in 2007. The job losses come despite a continuing surge in U.S. exports, buoyed by the falling value of the dollar, which makes U.S. goods cheaper overseas.

"There needs to be a look at both what we can do domestically in terms of taxes and help with the costs of health care and energy," says Scott Paul of the Alliance for American Manufacturing, a coalition of the United Steelworkers and major steelmakers.

"We also have to look at this from a competition perspective, and our manufacturers are just getting hammered," Paul says.

The job losses are likely to underscore populist economic sentiment both in Congress and on the presidential campaign trail. The winners of both parties' Iowa caucuses last week, former Arkansas governor Mike Huckabee, a Republican, and Sen. Barack Obama, D-Ill., have expressed doubts about U.S. trade policies.