US jobs growth skidded to a near-halt in December and the unemployment rate hit a two-year high, according to a government report today that raised recession fears and chances of more interest-rate cuts.
The Labor Department said only 18,000 new non-farm jobs were added last month, the weakest performance since August 2003, while the jobless rate jumped to 5 per cent from 4.7 per cent in November - the largest monthly rise since October 2001 in the wake of the September 11 terror attacks.
"This economy of ours is on a solid foundation, but we can't take economic growth for granted," President George W. Bush said after meeting with his so-called Working Group on Financial Markets. Bush has indicated he is mulling a set of measures to give the economy a boost.
The jobs data rattled financial markets already fearful about rising recession risks. Stock prices were sharply lower at midday, with the Dow Jones industrial average down more than 200 points in late trading. The dollar's value fell and government bond prices gained.
There was a consensus of opinion that the Fed will have to keep cutting interest rates to rescue the economy from the continuing drag from a depressed housing sector and an unusual reluctance on the part of financial institutions to lend.
The Fed said today it will boost its auctions of loans in January to $60 billion under a new Term Auction Facility that is designed to pump liquidity into the banking system and so encourage more lending.
The central bank's policy-setting committee meets on January 29-30th. It already has cut its benchmark federal funds rate 1 full percentage point since mid-September.
Bush administration officials hit the television circuit to press their case that it was not unusual for the pace of job creation to slow after a protracted period of growth.
A report at mid-morning from the Institute for Supply Management, showing its services index fell slightly to 53.9 in December from 54.1 in November, took some sting out of the jobs figure - if only because the fall was not as large as feared.
The jobs report, however, fell far short of the already low expectations on Wall Street, where economists had looked for a 70,000 non-farm jobs gain.