Brace for a year of stubbornly high unemployment.
Gripped by uncertainty over the economic recovery, employers chopped 85,000 jobs last month, and difficulty finding work helped chase more than half a million people out of the job market.
The unemployment rate held steady at 10 percent. It did not creep higher only because so many people stopped looking for work and are technically not counted as unemployed.
But the jobless rate is likely to rise in coming months as more people see signs of an improving economy and start looking for work again. Some economists think it could near 11 percent, which would be the highest since World War II, by June.
The Labor Department's monthly jobs report suggested employers will remain wary about hiring and skeptical of the economy recovery. Just Friday, UPS said it would cut nearly 2,000 white-collar jobs.
"It is a wait-and-see attitude," said Stuart Hoffman, chief economist at PNC Financial Services Group.
The economy is growing, but too weakly to persuade employers to ramp up hiring. Growth has to be robust to drive down the jobless rate, especially as more people start looking for work.
Complicating the recovery are remnants of the recession: high debt, a sputtering housing market and the inability or reluctance of people and businesses to borrow and spend. Most economists think unemployment will rise this year and stay high into 2012.
That poses a threat to President Barack Obama and Democrats in the fall congressional elections and escalated pressure on the administration to boost job creation. The "road to recovery is never straight," Obama said after Friday's report.
The president pushed for an expanded government program that he said would help create tens of thousands of new clean-technology jobs. Obama announced the awarding of $2.3 billion in tax credits to companies that manufacture green technologies. The money will come from last year's $787 billion stimulus program. He also called on Congress to approve an additional $5 billion to help create more such jobs.
Analysts had expected the economy to lose just 8,000 jobs in December. The loss of 85,000 was a setback after November, when, according to revised figures released Friday, the economy actually added 4,000 jobs, the first gains in nearly two years.
"The labor market is getting better, but it is still a long way from being healthy again," said Paul Ashworth, economist at Capital Economics Ltd.
Stephen Jankiewicz, who was filling out an online resume Friday at a job center in Milwaukee, said he has noticed more job listings for welding positions, but potential employers remain reluctant to hire.
Jankiewicz has been without a job since the manufacturing plant where he worked closed nearly two years ago. One company has expressed interest in him — but not until it's more confident in the recovery. He was told to call back in a month.
"They didn't want to hire anybody just to lay off anybody again," he said.
The 85,000 lost jobs for the month is based on a government survey of employers. A separate government survey of households found a much darker picture — nearly 600,000 fewer people said they had jobs in December than in November.
That gap could reflect layoffs at small businesses that are having trouble getting loans and can't afford to hire new people. That's something many economists think the employer survey misses because it undercounts small companies.
It was the second straight month the unemployment rate came in at 10 percent. The only reason it didn't rise was that 661,000 people stopped looking for jobs and left the work force.
In a normal economic recovery, more people would be entering, not leaving, the job market. If those people hadn't dropped out, the rate would have hit 10.4 percent in December, according to an estimate by the Economic Policy Institute.
Counting the people who have given up looking for work and the part-time workers who would rather be working full-time, the so-called underemployment rate edged up to 17.3 percent in December. The record high is 17.4 percent, reached in October.
The House has passed a bill intended to generate jobs, extend unemployment benefits and a health insurance subsidy and provide other aid. But the Senate is reluctant to go along. Republicans say Obama's first stimulus package hasn't been effective.
The December numbers complete a picture of a disastrous 2009 for American workers. The unemployment rate averaged 9.3 percent in 2009 — up from average of 5.8 percent in 2008 and the highest since 1983.
The number of unemployed has hit 15.3 million, up from 7.7 million when the recession started in at the end of 2007. The recession has wiped out 7.2 million jobs. And the number of people jobless for at least six months hit a record 6.1 million.
One of them is Debra Winchell, who lost her job last January as an administrative assistant at a health insurance company and has been looking for work since.
Winchell, of Latham, N.Y., said she is seeing more online job postings, giving her some hope. But the jobs pay as little as $10 an hour. And when she does apply, no one calls back. Her unemployment benefits are set to run out this spring, so Winchell, who is single, said she will reluctantly sign up for temporary work.
"I'll be lucky if it pays the bills," she said.
AP Business Writers Emily Fredrix in Milwaukee, Christopher Leonard in St. Louis and Associated Press Writers Philip Elliott and Jim Kuhnhenn in Washington contributed to this report.
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