Job losses mount; unemployment surges to 7.6%

WASHINGTON -- The unemployment rate rose to a 16-year high 7.6% in January as employers slashed a seasonally adjusted 598,000 jobs, the most since 1974, the government said Friday in a report that showed the job market deteriorating at a rapid clip.

More than 11.6 million people were out of work last month, up 54% from a year ago and the most since December 1982, when the economy was emerging from one of the deepest and longest recessions in U.S. history.

Jobs were cut in nearly all industries last month, and people of all races and education levels saw increases in unemployment, the Labor Department said.

Since the recession began in December 2007, employers have cut 3.6 million jobs — about half of those in the past three months. In January 2008, the unemployment rate was 4.9%.

January's losses followed upwardly revised cuts of 577,000 in December and 597,000 in November.

Including people who have given up looking for a job and those who were working part time, but wanted full-time work, the combined rate of unemployment and underemployment was a seasonally adjusted 13.9%, up from 9% a year ago and the highest since the Labor Department began tracking the number in 1994.

"The scary thing is that there is no end to the soaring jobless rate in sight," Bank of Tokyo-Mitsubishi chief financial economist Christopher Rupkey said in a note to clients, arguing the news will only speed the slump in consumer and business confidence, leading to less spending and investment and prolonging the downturn.

"Recovery hopes today have taken a big hit, as it looks like it may be more of a 2010 story than the latter half of 2009 that the markets were thinking before," he said.

While all sectors are being hit in what economists call the worst recession in decades, some are in worse shape than others.

The unemployment rate for African-Americans jumped to 12.6% last month, from 11.9% in December, to the highest rate in nearly 15 years. The jobless rate for whites was 6.9% in January, below the national average.

Those without a high school diploma had an unemployment rate of 12% in January while people with a college degree had a jobless rate of 3.8%, the Labor Department said.

In a bit of a brighter note, employers held hours steady at 33.3 hours for non-supervisory workers in January after slashing hours in previous months. Still, that was a record low.

Average hourly earnings, meanwhile, rose 5 cents to $18.46 an hour.

Jobs were slashed across a wide number of industries in January:

• Manufacturers cut 207,000, the most since 1982.

• Construction firms cut 111,00.

• Retailers cut 45,100. The numbers are seasonally adjusted, so the decline can not be blamed on the end of the holiday shopping season.

• Trucking firms cut 24,900.

• Financial companies cut 42,000, including 13,900 in real estate.

• Companies in the leisure and hospitality category cut 28,000, including 18,100 at hotels.

On the plus side, 54,000 jobs were added in the education and health services sector, while the federal government added 15,000. Jobs were cut at both state and local governments.

The report comes as lawmakers debate a stimulus package of more than $800 billion and the Obama administration is preparing to outline the next step for the remainder of the $700 billion financial rescue fund.

A number of economists say Friday's jobs report should bolster support for government help.

"If ever there were an economy in need of stimulus, this is it," High Frequency Economics chief U.S. economist Ian Shepherdson says.