Jobless Rate Nears a 7-Year High; Political Debate Shifts

America shed 124,000 more jobs last month, driving the nation’s unemployment rate to a near-seven-year high of 5.8% and shifting the political debate from war needs to economic fixes.

Although the new job losses announced Friday by the Labor Department represented a slowdown from the fierce pace of layoffs immediately after the September terrorist attacks, they struck at parts of the economy--such as manufacturing--that were thought to be on the mend. Their dimensions were partially masked by unexpected hiring in health care and government that analysts said is unlikely to continue.

Spurred in part by the new numbers and in part by the arrival of another congressional election year, both Republicans and Democrats seemed suddenly reawakened to the political dangers of rising joblessness and tumbling growth.

President Bush is scheduled to appear in Ontario today to tout his latest tax-cut plan among Latino business leaders and then move on to Portland, Ore., which has been particularly hard hit by cutbacks in high tech and electronics.

Senate Majority Leader Tom Daschle (D-S.D.) blasted Bush on Friday for last year’s tax cuts, asserting that they led to “the most dramatic fiscal deterioration in our nation’s history.”

“The new numbers are pretty ugly,” said Donald H. Straszheim, a Los Angeles economic consultant, former head of the Milken Institute and former chief economist with Merrill Lynch & Co. “They show the economy wasn’t declining as fast in December as it did in previous months, but it was still declining.”

December’s loss of 124,000 jobs followed November’s loss of 371,000 and October’s 448,000 and brings the total number of positions erased in the last year to 1.1 million, the largest annual job decline in two decades, according to Labor Department figures.

The new losses helped push the unemployment rate up from 5.6% in November to 5.8%. The increase fell particularly heavily on traditionally disadvantaged groups. Over the last year, unemployment among blacks has climbed from 7.5% to 10.2% and Latino joblessness has jumped from 5.8% to 7.9%, according to government statistics.

But in a curious turn of events, it has been the white-collar, college-educated workers most favored during the 1990s expansion who are now suffering some of the steepest job losses and largest jobless increases.

Statistics show, for example, that the unemployment rate for college graduates has more than doubled from 1.5% a year ago December to 3.1% last month. By contrast, the rate for high school graduates climbed by only a little more than a third, from 3.5% to 4.9%.

“This is shaping up to be a much-higher-end recession than the last one,” said Paul E. Harrington, associate director of Northeastern University’s Center for Labor Market Studies in Boston.

Investors and many analysts greeted the latest job figures as evidence recovery is just around the corner. “The recession is ending,” declared Robert V. DiClemente, chief U.S. economist with Salomon Smith Barney in New York.

But the end of the recession will provide little relief for ordinary Americans if the growth that replaces it is inadequate to revive corporate hiring and reverse the employment slump.

That’s what happened in the early 1990s, when the economy began recovering but the jobless rate kept right on climbing for 15 more months, a postwar record. And that is what has both Republicans and Democrats worried in Washington.

Bush administration officials went out of their way Friday to avoid any claims of improvement based on the slowdown in job losses.

The new job figures “suggest that the recession continued in December,” said Bush’s chief economic advisor, Lawrence B. Lindsey. “Unemployment is too high and rising.”

Bush and his aides have signaled that they will revive calls for congressional passage of an economic stimulus package, despite the fact that even many economists who informally advise the administration say it is unnecessary.

Aides said the administration would seek to portray the economy’s troubles as a Bin Laden, rather than Bush, recession. They will argue that the abrupt switch from budget surpluses to deficits is a product of the war on terrorism, rather than the results of Bush’s $1.35-trillion tax cut.

To avoid the fate of his father, who lost his bid for a second term by being seen as insensitive to the damage of the early-1990s recession, the current president and his aides will hammer home the administration’s concern for the jobless.

“If I were unemployed and someone said to me the economy will recover sooner or later, I would say I’d rather have sooner,” Lindsey said in an interview Friday. The administration will seek to speed improvement with new business tax cuts, moving up already approved personal tax cuts as well as some extra aid for unemployed workers.

Like the president, congressional Democrats saw little hope in Friday’s job numbers and pledged to renew efforts to approve an economic stimulus package. The earlier effort died in the political cross-fire between GOP demands for tax cuts and Democratic calls for new spending.

But Daschle signaled Friday that Democrats will offer a mirror-image account of the economy, laying blame for both the recession and Washington’s new deficits at Bush’s doorstep.

And in an inversion of the political conventional wisdom, Democrats will argue that they, rather than the Republicans, are the keepers of the fiscal flame and defenders of balanced budgets.

“A decade ago, our economy was shrinking. . . . We were running record annual budget deficits with no end in sight. . . . Some people feared we’d never get out of that fiscal hole. But we did,” Daschle said Friday. “And we did it the old-fashioned way. In 1993, [Democrats] made a decision: no more living beyond our means.”

While the political parties spar, economists said the nation’s employment picture will continue deteriorating, and no one is quite sure for how long.

The extent of December’s job loss was partially masked by the addition of 31,000 jobs in the health-care industry and the hiring of an extra 63,000 employees by state and local governments. Labor Department figures showed that the private-sector job loss, which did not include either of these gains, totaled 187,000.

Among the hardest-hit sectors was manufacturing, where economists had claimed to have spotted the early signs of improvement. Manufacturers slashed payrolls by an additional 133,000, bringing the total for the year to 1.3 million.

The airline and travel industries, which were especially hurt by the terrorist attacks, continued to shed jobs. Airlines dropped 26,000 more workers. Transportation services, which include travel agencies, cut 6,000. The help-supply industry, which includes temporary-help agencies, slashed 55,000 jobs. Since September 2000, the industry has dropped almost 700,000 workers and shrunk by 20%.

Even industries that usually boost employment for the holiday season did not do so in sufficient numbers to register in government figures. After being adjusted for seasonal factors, retail employment dropped by 77,000, the fifth month in a row of decline. Among retailers, only car dealerships added workers to cope with the buying binge set off by no-interest financing. Dealerships hired 4,000 people.

From a working person’s point of view, one of the few bright spots in the latest report was a 7-cent jump to $14.61 in the average hourly wages of production and nonsupervisory employees, who make up about 80% of the nation’s work force.

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Times staff writers Nick Anderson in Washington and Edwin Chen in Crawford, Texas, contributed to this report.