In a sign that the economy continues to flounder, the nation's unemployment rate climbed to 6 percent last month - matching an eight-year high - as businesses cut a surprisingly large number of workers from their payrolls, according to a Labor Department report released yesterday.
The unemployment rate jumped from 5.7 percent in October, and economists said they expect it to move higher in the coming months.
"I would expect it to get up to 6.2 percent," said Sharon Stark, chief fixed income strategist at Legg Mason Wood Walker Inc. "What this tells me is that we are stagnating. We are not growing, we are not contracting, it [the economy] is just sitting there."
Unemployment last reached 6 percent in April.
The last time it was higher than that was 6.1 percent in July 1994.
The number of people out of work for 27 weeks or more rose by 78,000 to 1.7 million last month, according to the report.
Nearly 1 million people will start running out of unemployment benefits three days after Christmas, because Congress failed to extend the payments before adjourning last month.
What troubled economists most about yesterday's report was that companies sliced 40,000 jobs from their payrolls last month, after jobs grew by 6,000 in October and 123,000 in August.
The job cuts were the most since February, when 165,000 jobs were lost.
"People were looking for some job growth," said Stephen Stanley, a senior market economist at RBS Greenwich Capital in Greenwich, Conn.
Stanley said he expected companies to add as many as 60,000 workers in November.
"You can parse through the data and make excuses, [but] at the end of the day it was a pretty big disappointment," he said.
Fits and starts
Others agreed, saying that the numbers depict an economy that has moved in fits and starts and has made little progress since emerging from recession about a year ago.
The unemployment number "definitely says the economy is still sputtering," said Robert T. Sweet, chief economist at Allied Investment Advisors in Baltimore. "In order to be a really true economic comeback and recovery, then job creation has to occur, and we are not getting job creation.
"That really is saying that we are not participating in a full-fledged economic recovery."
One reason for the sharp decline in payrolls could have been the late Thanksgiving holiday.
Typically, the payroll survey is conducted in early November and includes people who have been hired to work during the holiday shopping season.
But this year, many were hired after the survey, said Patrick Fearon, economist at A.G. Edwards & Sons Inc. in St. Louis.
"I don't think you can deduce too much from the overall number," Fearon said. "We might have to wait a month to get a sense for what is really happening in the job market."
A bright spot
If there was a bright spot yesterday, it was the stock market, which brushed off the bad unemployment news.
After falling at the start of the day, major indexes across the board rose, with the Dow Jones industrial average gaining 22.49 points to close at 8,645.77.
Experts said that the unemployment results were overshadowed by the resignations of U.S. Treasury Secretary Paul O'Neill and White House economic adviser Lawrence Lindsey, which the market applauded.
O'Neill has argued that the economy doesn't need more stimulus, such as tax cuts, and that the government should focus on balancing the budget.
"I think that is one of the reasons why the markets view that as positive," Stark said. "Just some new thinking on the economic side. I think that is all positive."
Said Sweet: "[O'Neill and Lindsey] are both good people, but we just need a change. I don't think [O'Neill] was expressing himself the way he should be. His comments didn't give any confidence. He just didn't have the confidence of the community."
Few positives
Experts could find few positives in the Labor Department numbers.
Manufacturers continued to shed workers, cutting their payrolls by 45,000.
Retailers let go 39,000 workers, and construction shrank payrolls by 4,000.
These cuts, along with the jobs added in some employment sectors, combined for a net total loss of 40,000 jobs.
"It wasn't a disaster," Stanley said.
"After all," he added, "payrolls were down 40,000. It was not like it was a huge decline."
But the average work week held steady at 34.2 hours, and average hourly earnings rose by 4 cents, the report showed.
"It is hard-pressed to find anything real positive here," Stark said.
Economists are predicting a sluggish fourth quarter, with growth in the 1 percent to 2 percent range.
The biggest dampers on the economy, they say, are the lack of growth in the manufacturing sector and a potential war with Iraq.
Consumer spending
Stark said a protracted war could result in a pullback in consumer spending, which accounts for two-thirds of the country's economic activity and has been the engine driving the economy.
Stanley said that concerns about war are hurting businesses and hampering their ability to plan.
But he agrees that much of the economy rides on the backs of consumers.
"It really comes down to consumer spending," Stanley said. "Some people have argued that people ... have run out of money to spend.
"I am not as pessimistic as that. The consumer has proven to be resilient."
The Associated Press contributed to this article.
