The decline in payrolls was in line with forecasts and followed a drop of 584,000 in November, bringing job losses for 2008 to 2.589 million, the most since 1945, according to a Labor Department report today in Washington.
The outlook for 2009 is no brighter as retailers from Wal- Mart Stores Inc. to Macy's Inc. slash profit forecasts and manufacturers including Alcoa Inc. cut output and staff. The figures will intensify pressure on U.S. lawmakers to speed Obama's proposed fiscal stimulus through Congress in an effort to save or create 3 million jobs.
The jobless rate was projected to jump to 7 percent from a previously reported 6.7 percent in November. Forecasts ranged from 6.5 percent to 7.1 percent.
Last month's decline was the 12th consecutive drop in payrolls. The economy created 1.1 million jobs in 2007.
Today's report showed factory payrolls shrank 149,000, the biggest drop since August 2001, after decreasing 104,000 in November. Economists had forecast a drop of 100,000.
The decrease included a loss of 21,400 jobs in auto and parts industries. Manufacturing, which makes up 12 percent of the economy, shrank in December at the fastest pace in 28 years, Institute for Supply Management figures showed.
Payrolls at builders dropped by 101,000 after decreasing 85,000. Financial firms reduced payrolls by 14,000, after a 28,000 loss the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 273,000 workers after a decline of 402,000. Retail payrolls dropped by 66,600 after a 100,000 decrease.
Job losses threaten to pull the economy into a reinforcing cycle of rising unemployment and declining household spending, what policy makers call a negative feedback loop, which is difficult to snap once it's begun.
The average work week shrank to a record-low 33.3 hours from 33.5 hours, today's figures showed. Average weekly hours worked by production workers dropped to 39.9 hours from 40.3 hours, while overtime decreased to 3 hours from 3.3 hours. That brought the average weekly earnings down by $2 to $611.39.