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US jobless rate hits 7.6 pct, raises stimulus stakes

The number of jobs lost was the worst since 1974 and the fifth highest since records were kept, according to the Labor Department nonfarm payrolls report, seen as one of the best indicators of economic momentum.

The department also revised up its estimate of December job losses to 577,000 from 524,000.

Payroll employment has declined by 3.6 million since the start of the recession in December 2007, with around one-half of the decline in the past three months.

The unemployment rate, which rose sharply from 7.2 percent in December, was the highest since September 1992.

“The expectations were for a disastrous January for the labor market, and the preliminary numbers exceeded these expectations,” said Sophia Koropeckyj at Economy.com.

Ian Shepherdson, chief US economist at High Frequency Economics, called the data “another horrific report, showing job losses across the economy.”

“If ever there were an economy in need of stimulus, this is it,” he said.

Christina Romer, chair of President Barack Obama’s Council of Economic Advisers, said the report showed the largest 13-month job loss since the payroll employment series began in 1939.

“These numbers, and the very real suffering of American workers they represent, reinforce the need for bold fiscal action,” she said in a statement.

“If we fail to act, we are likely to lose millions more jobs and the unemployment rate could reach double digits.”

The report comes with the US Congress debating a massive stimulus to revive an economy reeling from a housing collapse that spread to the financial and manaufacturing sectors and has dented consumer confidence and spending, the main driver of economic activity.

Obama’s administration is due to announce Monday a new effort to stabilize banks in an effort to ease a crippling credit crunch and get credit flowing again.

The recession deepened in the fourth quarter with an annualized decline in activity of 3.8 percent, yet some analysts say the first quarter of 2009 could be even worse.

“This report only established the urgency to pass whatever stimulus package and (bank) rescue package comes next week,” said Jon Ogg at 24/7 Wall Street.

“This is going to get worse. Much worse. President Obama has already warned in many of his speeches that millions more jobs will be lost.”

The report showed 11.6 million unemployed people in the labor force, which was reduced by over 700,000 people who stopped searching for work.

“If you look at the details it’s even weaker than the headline numbers,” said Julia Coronado, economist at Barclays Capital.

Coronado said the household survey, used to calculate the unemployment rate, was even worse than the employer survey to calculate job losses.

“The household survey is showing a rapid deterioration and much larger job losses, it suggests 1.2 million jobs lost which explain why the unemployment rate jumped so much,” she said.

“This report is weak across the board, virtually every major sector is shedding jobs ... whether this is the peak or not, it’s hard to say.”

Manufacturing shed 207,000 jobs in January, the largest one-month decline since October 1982.

In other sectors, construction lost 111,000 jobs and the retail sector shed 45,000. The financial sector axed 42,000 over the month and by 388,000 since a peak in December 2006.

Health care and government were among the few sectors showing gains.

But the service sector overall, which represents about 85 percent of nonfarm employment, lost 279,000 jobs in the month, with the goods-producing sectors losing 319,000.