The Labour Department said the unemployment rate had risen to 7.2 per cent last month, the highest level since January 1993. The rate was 6.8 per cent last November. Analysts had predicted a reduction of 550,000 jobs last month.

Figures for November were revised to show a cut of 584,000, previously reported as a 533,000 loss, while those for October were revised to show a cut of 423,000 from one of 320,000. The revisions brought the total reduction in non-farm payrolls in the four months through December to 1.9 million.

'They shoehorn in all these downward revisions. Some of the biggest are in financial services. This is a very dismal report. This paints a much worse picture for 2008 than we had thought,' said FTN Financial analyst Lindsey Piegza.

'This doesn't bode well for first-quarter unemployment. This is one of the most significant downward quarters for jobs in post-World War history.'

UBS Securities economist James O'Sullivan agreed it was a weak report, but said people had been prepared for it.

'The trend is consistently weakening. The bottom line is that the labour market is weakening rapidly. We expect the unemployment rate to rise to 8.3 per cent by the fourth quarter,' he said.

US equity index futures turned higher after the data came out, while the greenback pared its gains against the euro.

Separately, Walgreens, the second-largest US drugstore chain, said yesterday it would eliminate 1,000 positions, or about 9 per cent of those employed in corporate and field management.

The job cuts are part of a plan to achieve US$1 billion (S$1.48 billion) in annual savings by the financial year ending in August 2011, Walgreens said yesterday in a statement. The company expects to incur costs of as much as US$400 million during the next two fiscal years.

None of the job cuts would affect store personnel, Walgreens said. The company employs 237,000 in all, spokesman Michael Polzin said yesterday in an e-mailed statement.

REUTERS