Job losses hit 2.6 million; layoffs continue

WASHINGTON -- In 2008, 2.6 million jobs disappeared, the most since World War II, and the pain is only getting worse with 11 million Americans out of work and searching. Unemployment hit a 16-year high of 7.2 percent in December and could be headed for 10 percent or even higher by year's end.

Friday's government figures were "a stark reminder," said president-elect Barack Obama, that bold and immediate government action is needed to revive a national economy that's deep in recession and still sinking.

More than a half million jobs melted away as winter took hold in December -- 524,000 in all, the government estimated -- and the true carnage will almost certainly turn out to be even worse when the figures are nailed down more clearly a month from now.

"Behind the statistics that we see flashing on the screens are real lives, real suffering, real fears," said Obama, already moving full-speed with Congress to put together an emergency revival plan a week and a half before taking office.

It's real, indeed, for 38-year-old Rachel Davis of St. Louis.

"If you get laid off right now, God help your soul," she said. "You better hope you've got savings or someone backing you." In fact, she was laid off three months ago after working as a dental technician for 20 years. While Congress and the new president struggle to find answers, she said, "I have no faith in this system" and plans to move out of the country in hopes of finding better luck.

The severe recession, which just entered its second year, is already the longest in a quarter-century and is likely to stretch well into this year. The fact that the country is battling a housing collapse, a lockup in lending and the worst financial crisis since the 1930s makes the downturn especially dangerous.

All the problems have forced consumers and companies alike to retrench, feeding into a vicious cycle that Washington policymakers are finding difficult to break.

The Labor Department's unemployment report showed widespread damage across U.S. industries and workers -- hitting blue-collar and white-collar workers, people without high school diplomas and those with college degrees.

"One word comes to mind -- dreadful," said Stuart Hoffman, chief economist at PNC Financial Services Group.

And there's no relief in sight. The new year got off to a rough start with a flurry of big corporate layoffs, and there were more Friday. Airplane maker Boeing Co. said it plans to cut about 4,500 jobs this year, and uniform maker G&K Services Inc. is eliminating 460 jobs.

Employers also are cutting workers' hours and forcing some to go part time. The average work week in December fell to 33.3 hours, the lowest in records dating to 1964 -- and a sign of more job reductions in the months ahead since businesses tend to cut hours before eliminating positions entirely.

"There is no indication that the job situation would stabilize anytime soon," said Sung Won Sohn, economist at the Martin Smith School of Business at California State University. "This could turn out to be one of the worst economic setbacks since the Great Depression."

Economists predict a net total of 1.5 million to 2 million or more jobs will vanish in 2009, and the unemployment rate could hit 9 or 10 percent, underscoring the challenges Obama will face and the tough road ahead for job seekers.

All told, 11.1 million people were unemployed in December. An additional 8 million people were working part time -- a category that includes those who would like to work full time but whose hours were cut back or those who were unable to find full-time work. That was up sharply from 7.3 million in November.

If those part-time employees, discouraged workers and others are factored in, the unemployment rate would have been much higher -- 13.5 percent in December. That was the highest for that broader category in records going back to 1994.

Worried about the sinking economy and their own financial fortunes, companies are trimming payrolls as a way to cut costs. Government revisions showed losses in both October and November to be much deeper than previously reported.

"Clearly, the situation is dire, it is deteriorating, and it demands urgent action," Obama said Friday. "For the sake of our economy and our people, this is the moment to act, and to act without delay."

Obama, who takes over Jan. 20, is promoting a huge package of tax cuts and government spending that could total nearly $800 trillion over two years. With add-ons by lawmakers, the package could swell to $850 billion or higher.

The unemployment rate zoomed from 6.8 percent in November, to 7.2 percent last month, the highest since January 1993.

The rate for blacks climbed to 11.9 percent, the highest since the spring of 1994. The rate for Hispanics rose to 9.2 percent, the highest since May 1996. The rate for teenagers rose to 20.8 percent, the highest since September 1992.

Last year was the first that payrolls had fallen for a full year since 2002, and the loss was the most since 1945, when nearly 2.8 million jobs disappeared. Though the number of payroll jobs in the U.S. has more than tripled since then, losses of this magnitude are still brutal.

The nation's jobless rate averaged 5.8 percent for the year -- up sharply from 4.6 percent in 2007 and the highest since 2003.

During President George W. Bush's nearly eight years in office, a net total of 3 million jobs were created. In President Clinton's two terms, roughly 21 million jobs were generated.

Employment last month shrank in virtually every part of the economy -- construction companies, factories, mortgage brokers, banks, real-estate firms, accountants and bookkeepers, computer designers, architects and engineers, retailers, food services, temporary help firms, transportation, publishing and waste management. The few fields spared included education, health care and government.

The lost-job total for December probably understated the reality since some companies probably held off on layoffs around the holidays, economists said. Moreover, the government collects the payroll information around mid-month. So the full extent of the layoffs probably wasn't captured, making it even more likely there will be big reductions in January and that December's cuts will be revised upward.

Workers with jobs saw modest wage gains. Average hourly earnings rose to $18.36 in December, a 3.7 percent increase over the year. But high prices for energy and food through much of 2008 made people feel that their paychecks weren't stretching that far.

Corporate layoffs continue to pile up. Earlier this week, drugstore operator Walgreen Co., managed care provider Cigna Corp., aluminum producer Alcoa Inc., data-storage company EMC Corp., Intermec Inc., which makes electronic devices for tracking inventory, and computer products maker Logitech International announced major layoffs to cope with the recession.

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AP Business Writer Christopher Leonard in St. Louis contributed to this report.