Unemployment Gives a Warning about Economy

The unemployment rate rose to five percent in the month of December. The economy only added 18,000 jobs and that is the lowest amount in over four years. Economists viewed the report as the most powerful indication to date that the United States could well be falling into a recessionary downturn. There is evidence of widening unemployment heightened anticipation that the Federal Reserve would further cut interest rates this month, perhaps by an unusually large half a percentage point, in a bid to prevent the economy plummitting. A recession is typically defined as an extended period of at least several months during which economic activity shrinks and unemployment rises. The swift deterioration in the job market resonated as a warning sign that troubles once confined to real estate and construction are spilling into the broader economy, threatening the ability of American consumers to keep spending with customary abandon. On Wall Street, the report led to a big sell-off that sent the Dow Jones industrial average plunging nearly 2 percent. But the jobs report for December suggested that the negatives dogging the economy finally appear to be dragging it down.
“There’s no mystery as to why the unemployment rate went up,” said Robert A. Barbera, chief economist at the research firm ITG. “The mystery is why it took so long.”

http://www.nytimes.com/2008/01/05/business/05econ.html?_r=1&ref=us&oref=slogin