The recession-ravaged economy lost 2.6 million jobs over the course of 2008, the most since 1945, the Labor Department said. Of those, 1.9 million were lost in the past four months.

The jobless rate, which is calculated on a separate household survey, climbed to 7.2 per cent from 6.8 per cent a month earlier, hitting the highest level since January 1993, the report showed.

The number of job losses was roughly in line with forecasts but the unemployment rate rose above the consensus estimate of 7.0 per cent.

The number of unemployed rose to 11.1 million in December, the data showed.

The Labor Department also revised higher the number of job losses for the prior two months. The October figure was changed to show a loss of 423,000 jobs from 320,000 and November's data to a loss of 584,000 from 533,000.

The figures come as the world's biggest economy is gripped by the worst recession in decades, which began in December 2007 after a collapse of a house bubble and massive financial sector losses that led to a credit crunch.

Douglas McIntyre at 24/7Wall Street said the data 'could hardly have been worse' but that 'the disaster may be in large part what saves the economy' by forcing Congress to pass a big stimulus plan.

In December, a large portion of the losses came in manufacturing, which shed 149,000 in the month and 791,000 in the year, with the auto sector hard hit.

But the service sector, which accounts for some 80 percent of employment, fared even worse, with 273,000 jobs lost in the month.

Construction jobs fell by 101,000 in December, and has fallen by 899,000 since peaking in September 2006.

The retail sector shed 67,000 jobs in December and 522,000 for all of 2008.

More than half of the losses in 2008 occurred in the last four months of the year.

Another indicator of the labor situation, the average workweek, fell by 0.2 hour to 33.3 hours, the lowest level since recording of the data began in 1964.

'This is not a good sign for future employment trends, as employers tend to cut hours before workers,' said analysts at Briefing.com. -- AFP