WASHINGTON -- The U.S. economy edged a step closer to recession in December by producing only 18,000 new jobs, its worst performance in four years, and sending the unemployment rate to a two-year high of 5 per- cent.
The meager job gains, reported yesterday by the Labor Department, were much weaker than expected and showed the toll that tightening credit, a slumping housing market and a staggering stock market are taking on the nation.
The worst of the job-market trouble was concentrated in construction, which shed 49,000 jobs, and manufacturing, which lost 31,000. But the losses were widespread, suggesting that the economy's troubles run deep. They were partly offset by gains in only a few areas, especially health care, food service and government.
"There's nothing heartwarming about this report," said Neal Soss, chief economist with Credit Suisse Group Inc. in New York. "It confirms what economists have been worried about, which is a broad-based economic slowdown."
Stocks tumbled on the news. The Dow Jones industrial average ended the session down 256.54 points, or nearly 2 percent, to 12,800.18.
The broader Standard & Poor's 500 index slid 35.53 points, or 2.5 percent, to 1,411.63, and the Nasdaq composite plunged 98.03 points, or 3.8 percent, to 2,504.65.
The weak hiring was accompanied by stronger-than-usual wage growth.
Average hourly earnings increased 7 cents, or 0.4 percent, to $17.71 in December, according to the Labor Department. That was up 4.3 percent from a year ago, and, though good news for working people, it made the Federal Reserve's job of managing the economy harder by adding a whiff of inflation even amid signs of a slowdown.
President Bush, meeting yesterday with financial advisers, including Treasury Secretary Henry M. Paulson Jr., said the economy was solid despite the monthly jobs slowdown.
"This economy of ours is on a solid foundation, but we can't take economic growth for granted," the president said. "There are signs that will cause us to be ever more diligent and to make sure that good policies come out of Washington."
The administration said it was considering an economic stimulus package that might include tax cuts to ward off a recession. Officials stressed that Bush has not decided yet to offer a proposal but was looking at a variety of options, with a plan possibly being unveiled around the time of his Jan. 28 State of the Union address.
