By Alister Bull
WASHINGTON (Reuters) - U.S. employers axed payrolls by 533,000 jobs in November, the most in 34 years, as the year-old recession hammered the economy and hardened calls for dramatic government action to turn the tide.
The Labor Department on Friday said the unemployment rate hit 6.7 percent last month, the highest since 1993, which adds up to 10.3 million Americans out of work or 2 million more than the population of New York City.
The jobless rate, which stood at 6.5 percent in October, would have been even higher but for people leaving the labor force in discouragement over their search for work.
A slew of U.S. companies have announced jobs cuts this week, including phone giant AT&T, which said on Thursday it was letting 12,000 workers go, and economists expect the unemployment rate to top 8 percent by late next year.
"You can't get much uglier than this. The economy has just collapsed, and has gone into a free fall," said Richard Yamarone, chief economist at Argus Research in New York.
The U.S. government has pledged $700 billion of taxpayer money to shore up the banking sector and President-elect Barack Obama has pledged to push for a powerful fiscal stimulus, with more aggressive action from the Federal Reserve also in the cards.
The U.S. central bank has cut interest rates to 1 percent and is expected to lower them toward zero in the coming weeks. It is also deploying unconventional measures to buy government debt and lend directly to companies to stimulate activity.
Obama, who takes office on January 20, said the downturn demanded action, which economists say means a spending and tax plan costing between $500 billion and $700 billion.
"There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better," Obama warned.
"This jobs picture painted today is staggering, and it should be all the evidence Washington needs to act swiftly and decisively to shore up this economy," said Sen. Charles Schumer, a New York Democrat who chairs the congressional Joint Economic Committee.
U.S. stock markets sagged on mounting evidence the country was locked in the worst recession in a generation, while oil priced retreated under $42 per barrel. Markets in Europe and Latin America fell in tandem on the woeful jobs report.
A worldwide credit crisis sparked by mounting defaults on U.S. mortgages has pushed economies around the globe into or toward recession. Canada said earlier on Friday its economy shed 70,600 jobs in November, the most since June 1982.
U.S. mortgage foreclosure levels hit a record in the third quarter, the Mortgage Bankers Association said on Friday, which estimates that 2.2 million home mortgages will start the foreclosure process this year before government efforts to stem the tide can gain traction.
U.S. job losses in November were the steepest since December 1974, when 602,000 jobs were shed, and were much worse than the consensus on Wall Street for a 340,000 reduction.
In addition, job losses in recent months turned out to be worse than previously reported. October's loss was revised to show a cut of 320,000, originally given as a 240,000 loss, while September's drop was revised to 403,000 from 284,000.
That meant 199,000 more jobs were lost in September and October than previously thought and the total reduction in U.S. nonfarm payrolls for the last three months was 1.256 million, with almost 2 million jobs shed in the year so far.
If December's job picture mirrored the last three months, it would make 2008 the worst for employment since 1945.
"It's just a disaster," said Stephen Stanley, chief U.S. economist at RBS Greenwich in Greenwich, Conn.
Service-providing businesses alone shed 370,000 jobs in November, or two-thirds of the overall job declines, following a loss of 153,000 jobs the month before.
That meant labor market weakness has now shifted over from the goods-producing sectors of the economy to the far more important services sector, which delivers almost 80 percent of U.S. output.
Employment in manufacturing dropped by 85,000, while construction payrolls shrank by 82,000 jobs. Construction employment has declined for 17 straight months, and factory jobs have declined 29 straight months.
The length of the workweek slipped to 33.5 hours, the shortest since records began in 1964, a Labor Department official said. The drop in the workweek could point to further job losses ahead as business cut back sharply on production.
(Additional reporting by Richard Leong, Al Yoon and Lynn Adler in New York; Editing by Neil Stempleman)
