Employers added just 18,000 jobs last month, the fewest since August 2003. The government added 31,000 jobs, but the private sector cut 13,000. Economists had expected December hiring to be much greater, and for unemployment to nudge just slightly from 4.7 to 4.8.
Many jobs were cut in the manufacturing, construction, and financial services markets, as the economy continued to cope with a housing slump and mortgage crisis, the Associated Press reported. Retail jobs also saw a decline.
The White House said the unemployment numbers were not dramatic by historical standards.
"I'm not trying to paint the uptick in the rate of unemployment with rosy colors. We'd rather not see it go up to 5 percent, but I think you have to take a step back and look at the broader picture and recognize that by historic standards that's still a relatively low rate of unemployment," Deputy Press Secretary Tony Fratto told the AP.
President Bush met with his top economic advisers on Friday to discuss policy issues, but has not said definitively whether he will offer a stimulus package to slow the rate of U.S. economic decline.
"We're not ready to say whether we will, in fact, have something or not, at this point," Fratto said. "We need a little bit more information. There are lots of ideas out there. Obviously tax policy is an important component, but we'll see. We want to take in more data."
At a press conference after Friday's meeting President Bush said, "While there is some uncertainty, the report is that the financial markets are strong and solid."
But he warned Congress against enacting policies that would raise taxes, adding, "If the foundation is strong yet indicators are mixed, the worst thing that Congress can do is raise taxes on the American people and on American businesses."
Any stimulus package is likely to be announced at the President's State of the Union address on Jan. 28.