The unemployment rate was up 0.2 percentage points from a revised 5.6 percent in November, the Labor Department reported Friday. Since the recession began in March, businesses have slashed 1.4 million jobs.
December's loss of 124,000 jobs reflected continued declines in manufacturing, retail, air transportation and temporary employment services. But the hemorrhaging slowed somewhat last month. Job losses had averaged about 400,000 a month in October and November.
But 2001 was a particularly bad year for manufacturing, which shed 1.3 million jobs or about 7 percent of its work force. Many manufacturing companies lost more than one in 10 of their workers last year, mainly in furniture, metals, industrial machinery, textiles and apparel.
A sliver of hope for manufacturing appeared in December's employment report, as the factory workweek increased by 0.4 hour to 40.7 hours and factory overtime rose 0.2 hour to 3.9 hours.
December declines also were heavy in retail with 77,000 job cuts, particularly at general merchandise stores and retailers such as toy stores and jewelry stores, both of which fell short of their typical holiday hiring.
Those declines were tempered slightly by job gains in auto dealerships as free financing beckoned customers. During 2001, retail had added 200,000 jobs by July, but losses since then have left employment down by 73,000 during the year.
Air transportation, which continues to be socked by weakened demand since the terrorist attacks, lost 26,000 jobs. here also were sizable losses in communications and public utilities.
The job market will be one of the last signs of recovery if, as analysts project, the nation emerges from recession sometime next year. The unemployment rate probably will continue to rise in the next few months because companies will be reluctant to hire back workers.
Many economists predict the jobless rate will top out at around 6.5 percent by June or July, plateau for a while, and start going down in the fall or winter.
The jobs numbers came in roughly in line with private forecasts. U.S. economists in a Reuters poll had forecast December a job loss of 139,000 jobs while the unemployment rate was projected at 5.8 percent.
To revive the economy, the Federal Reserve cut interest rates 11 times in 2001. Analysts generally expect those rate reductions will help the economy stage a recovery by the spring.
Signs of a bottoming out already have appeared.
Adding to that good news, the Commerce Department said in a report released Thursday that construction activity rose by a solid 0.8 percent in November, led by a sharp increase in spending on big government projects. Commercial projects, including hotels and industrial complexes, by private builders also posted gains.
Some economists, who noted signs the recession that began in March may be giving way to a recovery, were heartened that the furious pace of layoffs seen a few months ago was abating.
"Before you can start to have an expansion you have to stop the bleeding, and this is another set of numbers that indicate we are reaching a bottom, and that is of course a very good sign so that we can start to turn it around," said Delos Smith, economist at the Conference Board.
"It probably is best set of (employment) numbers we have seen since the Sept. 11 crisis," he added.
For December, job growth in services and government helped offset the overall employment decline, the new Labor Department report said. Service empoyment grew by 72,000, and hospitals, home health care and private education had the largest gains. In government, job gains totaled 63,000.
Temporary employment firms continued to lay off workers, cutting 55,000 positions in December. The industry has shed 688,000 jobs since September 2000, or 19 percent of its employment.
Overall, the proportion of the nation's population holding a job last month edged down to 63 percent compared with 64.5 percent in December 2000.
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