The Labor Department said today in Washington that payrolls rose by 18,000, capping the worst year for job creation since 2003. The jobless rate increased to 5 percent from 4.7 percent in November, while the Institute for Supply Management said growth in U.S. service industries cooled last month.
Treasuries rallied, the dollar fell and stocks slid after the jobs report indicated more damage to the economy from the housing slump and reduced access to credit. The figures may also strengthen calls for President George W. Bush to stimulate the economy during his final year in office.
"It's time for the Fed to step up to the plate,'' said Maury Harris, chief economist at UBS Securities LLC in New York. `"This is a very vulnerable economy right now.''
Excluding a gain in government jobs, payrolls fell last month for the first time since July 2003, hurt by losses in manufacturing, construction and the retail industry.
"This tells you that the strains from credit problems and so forth that have been developing the last six months are starting to bite and they're biting in a way that now finally draws consumption into question,'' said Neal Soss, chief economist at Credit Suisse Group Inc. in New York.