THE US economy shed 533,000 jobs last month, with the worst employment figures since 1974 underlining the scale of the economic crisis gripping the country.

The shock data for November far exceeded economists` most pessimistic estimates and sent share prices into a sharp retreat.The unemployment rate is now 6.7 per cent, up from 6.5 per cent in October. It is the highest level since 1993.

Nigel Gault, chief US economist at the forecasting firm IHS Global Insight, said the economy was destined for its worst recession since the second world war. “These are just absolutely disastrous numbers,” he said.

The figures will increase the expectations weighing on the incoming president, Barack Obama, who is planning an economic stimulus package when he takes office in January. Some experts have called for an injection of at least $700bn into the US economy and Obama has pledged to create 2.5m jobs over his first two years in office.

Obama warned on Dec 5 that “there are no quick or easy fixes” to the crisis as he again avoided giving details on how he will jump-start the economy, preferring to outline his programme when he assumes office on January 20. He said “At the same time, this ... provides us with an opportunity to transform our economy.”

The announcement brings the jobless total to 10.3 million people out of a workforce of 154.6 million. Economists believe the jobless rate will peak at between 8.7 per cent and 9.8 per cent over the next two years. Ryan Sweet, senior economist at Moody`s economy.com. said “We are going to see the labour market remain very, very weak throughout the remainder of this year and 2009. It hinges on the monetary and fiscal response.”

The Federal Reserve Bank will consider the latest jobs figures when it discusses interest rates, now at 1 per cent, on December 16. Economists said the US central bank could be encouraged to cut rates further amid confirmation that inflation is a vastly diminished threat, with the spot price of Brent crude oil falling to less than $40, against a record high of $147 earlier this year.

Hourly employee earnings also posted a modest month-on-month rise, up 0.4 per cent to $18.30, underlining the lack of upward pressure on wages. However, economists warned that the hourly earnings figure did not bode well for consumer spending, which accounts for more than two-thirds of US economic activity.

The jobs data also points to a severe contraction in the world`s largest economy in the final quarter of this year, with many forecasts indicating a decline in gross domestic product of 4 per cent following a fall of 0.5 per cent in the previous three months. The US economy tipped into recession in December last year, a panel of experts declared earlier this week.

Friday`s data showed job cuts in every sector barring healthcare, education and the government. The service industry suffered the heaviest job losses in November, shedding 370,000 posts. Within that total, retailers axed 91,000 jobs and professional and business services, which includes the financial sector, made 136,000 people redundant. The goods-producing industries lost 163,000 jobs with 82,000 jobs going in construction and 85,000 in manufacturing. Companies that shed jobs last month included the toy firm Mattel, electronics retailer Circuit City and Citigroup, the banking giant.

The bleakest predictions were for up to 500,000 job losses, with mid-range forecasts of less than 400,000. Today`s number for declines in non-farm payrolls is the worst since December 1974, when 602,000 people lost their jobs.

The jobless rate in the 1980 to 1982 recession peaked at 10.8 per cent, the worst since the Great Depression. The current US recession is expected to match its post-war predecessors for length. According to the National Bureau of Economic Research, the downturn is 12 months old and needs to last five more months to outrank the 1973-75 and 1980-82 recessions. — The Guardian, London