Unemployment Rate Unexpectedly Surges

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The nation's unemployment rate unexpectedly shot up to 6.0 percent in November, matching an eight year-high set in April and raising new concerns about the strength of the economic recovery.

The report, released Friday by the Labor Department, portrayed a bleak snapshot of the U.S. economy at a time when many analysts had thought that rock bottom days for job seekers were behind them. Analysts were expecting a slight increase from the 5.7 percent posted in October.

Amid growing uneasiness about the ailing economy, President Bush revamped his economic team Friday. At the request of the White House, Treasury Secretary Paul O'Neill and economic adviser Larry Lindsey resigned. Bush advisers have been increasingly worried that a lagging economy could hamper the president's re-election prospects.

U.S. companies also slashed 40,000 jobs in November, the most since nine months ago, when 165,000 jobs were cut. Economists had forecast modest job growth for last month.

November's jobless rate was matched back in April, and it was the highest since July 1994, when the rate hit 6.1 percent. Economists said this recovery, proceeding in fits and starts, is starting to mirror that of the last recession when Bush's father was president. High unemployment and the dismal economy helped oust him from a second term, something his son has vowed not to repeat.

Friday's jobs report surprised analysts, who thought the unemployment rate might tick up to 5.8 percent for November with stabilizing layoffs and fewer workers seeking unemployment benefits in recent weeks.

That had created optimism for the holiday shopping season — a hope that workers were lining up at cash registers rather than at unemployment offices. Consumer spending accounts for two-thirds of all economic activity in the United States and has been the main force keeping the economy going all year.

Low mortgage rates, tax cuts, and extra cash coming from a refinancing boom have helped to support consumer spending, offsetting some negative factors, including the roller-coaster stock market, a possible war and a string of corporate scandals.

Still, economists did not expect companies to go on a hiring spree. In the face of the struggling recovery and economic uncertainties, companies are keeping their work forces lean.

The report showed that employment in the nation's factories continued to decline, with a loss of 45,000 jobs last month. Hiring also was down in retail, mostly because of weak hiring during a time that stores typically build up work forces for the holiday shopping rush.

Jobs continued to get cut last month in the communications industry, which has lost 156,000 jobs since April 2001. Transportation employment held steady though.

Countering those job losses was an overall hiring increase in services. Health-related companies made up more than half of the November increase, with notable gains in hospitals and nursing facilities. But employment in temporary employment firms — an industry where hiring had been on the upswing for much of the year — fell for the second month in a row. Such employment is closely watched by economists because companies often seek temporary help as their businesses start growing again instead of taking on full-time workers.

Other major industries showed little change last month, including construction and government, which had a large gain in October.

Overall, the holiday shopping season may not be a major boon to the struggling economy. November's sales were modest, and consumers worried about job security are expected to be frugal. Stores are responding by discounting aggressively, though lean inventories will help protect profit margins, analysts said.

The Federal Reserve last month, wanting to energize the recovery, cut a key interest rate by a bold half a percentage point to a 41-year low of 1.25 percent. It marked the first rate reduction of this year and the 12th since January 2001. Analysts believe the Fed will hold rates at that low level at its meeting Tuesday.