Economy loses 85,000 jobs; unemployment rate stuck at 10 percent

The economy shed 85,000 jobs in December as the nation’s unemployment rate stuck for a second month at 10 percent.

The job losses reported in the monthly Labor Department report were higher than expected by many analysts, dimming hopes that the economy was headed for a quicker turnaround after a brutal recession.

{mosads}In the days before the report’s release, there had been predictions the report might show the economy actually added jobs last month.

Those hopes built after unemployment fell in November from 10.2 percent to 10 percent and Labor reported the economy lost a mere 11,000 jobs. Labor on Friday revised that report to show the economy actually added 4,000 jobs in November – the first gain in nearly two years.

Instead, job losses in December went back into negative territory, with manufacturing and construction showing losses.

Christina Romer, chairwoman of Obama’s Council of Economic Advisers, highlighted November’s job gains and said the recovery would not proceed in a straight line. She said in a statement Friday that it is important not to put too much emphasis on one monthly report.

“It is essential that we continue our efforts to move in the right direction and replace job losses with robust job gains,” Romer said.

But Republicans noted the report as disappointing and charged that the economy is sluggish because of policies enacted by the Obama administration and Democratic Congress.

“A jobless recovery is a far cry from what the American people were promised last winter when Washington Democrats jammed through a trillion-dollar stimulus that they said would create jobs immediately,” House GOP Leader John Boehner (Ohio) said in a statement.

He said the administration should stop “wildly pivoting” from one issue to the next, calling on President Barack Obama to scrap healthcare reform.

The report may increase anxieties for Democrats already anxious about this year’s midterm elections, in which the party faces a difficult political environment given the economy. The week began with the surprising retirement of Sen. Byron Dorgan (D-N.D.), which handed Republicans a golden opportunity to pick up a Senate seat in 2010.

While Congress is still trying to finalize a healthcare bill, the economy is likely to take center stage when lawmakers return to Washington in January. Congressional Democrats and the White House are planning to move a new jobs bill early in 2010.

The monthly report from the Labor Department did hold some signs that the jobs market is continuing to stabilize.

Temporary help services added 47,000 jobs in December, the fifth consecutive month there has been an increase.  Temporary workers are generally the first workers to be re-hired in a recovery.

But the average workweek for production and nonsupervisory workers was unchanged at 33.2 hours after increasing in November.  An increase in the average workweek would suggest that employers are adding hours for existing workers, something common before companies hire new workers.

Another ominous sign, according to Heidi Shierholz, an economist at the Economic Policy Institute, is the reduction in the labor force. The U.S. labor force has declined by 810,000 since the recession began in December 2007. Those lost workers are no longer looking for jobs.

Shierholz said that even in a downturn, the labor force should grow given population growth. She estimated that the work force should have increased by 2.8 million since the recession began.

Once an economic recovery takes off, those lost workers are likely to return to labor markets, which will make it more difficult to lower the unemployment rate.

Shierholz said the job losses last month were a little higher than what she had expected. Given unemployment insurance claims in November, however, she said the figures were not out of line with what should have been expected.

This article was first published at 8:52 a.m.