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Job Woes Deepen Economic Anxiety
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"Now we're not quibbling over whether the Fed will cut rates; it's a question of how much," Dye said.
The Fed is in a tricky spot as it decides how much to lower rates. Oil prices touched $100 a barrel Wednesday and Thursday, and have risen in recent weeks with prices of other commodities. Lower interest rates would only exacerbate the threat of higher prices.
"The Fed is in the unenviable position of trying to serve two radically different taskmasters," said Bruce McCain, head of investment strategy at Key Private Bank. Fed Chairman Ben S. Bernanke "can't afford to let market psychology and economic psychology of consumers spin out of control. But we are seeing signs of greater inflation."
While economic fallout from the housing sector has spread, there are significant parts of the economy that are adding jobs, which has created a bifurcated labor market. The professional and business services sector added 43,000 jobs and health care added 27,900.
"If you're an IT person in Washington, D.C., or an engineer in San Francisco, you have your choice of jobs," said Tig Gilliam, chief executive of the staffing firm Adecco Group North America. "If you do construction, you're doing to have a hard time finding a job you want."
The data released yesterday underscore that assertion. In the past year, the unemployment rate for professional occupations barely edged up, to 1.9 percent from 1.8 percent. In the construction sector, the jobless rate rose to 9.6 percent from 7 percent.
The impact is particularly hard felt among minorities. The unemployment rate rose 0.6 percentage points in December for blacks and Hispanics, compared to a 0.2 point rise among whites.
There were some one-time factors that influenced the numbers. The Hollywood writers' strike caused the broadcasting sector to lose 11,600 jobs, which presumably will return once the strike ends.
But the numbers overall were dismal enough to send markets swooning, continuing a rough start to the year. The Dow Jones industrial average fell 2 percent, or 257 points, while the Nasdaq composite index recorded an even sharper decline, 3.8 percent. And after three trading days this year, the broad-based Standard & Poor's 500-stock index is off almost 4 percent.
