In a worrisome sign of further weakening in the U.S. labor market, November saw the highest number of layoffs in the private sector in more than 32 years.

The Labor Department reported Friday that U.S. nonfarm payroll employment fell sharply in November, with 533,000 jobs lost. The unemployment rate rose to 6.7%, from an unrevised October figure of 6.5%. The prior October nonfarms payroll figure was revised to reflect a larger slide of 320,000, from the initially reported 240,000. Economists had been forecasting a substantially milder payrolls reduction of 350,000 jobs in November but a slightly higher 6.8% rate of joblessness. Employment declined in nearly all major industries, although health care continued to add jobs.

Equities recovered a bit at the markets' open, after plunging in response to the news during premarket trading. The Dow lost 0.7%, or 60 points, to 8,315; the S&P 500 fell 1.0%, or 9.2 points, to 836; and the Nasdaq tumbled 0.8%, or 13 points, to 1,432 during early trading. Bonds rallied, as investors fled to safe haven government debt. The yield on the benchmark 10-year Treasury rose to 2.61%, from 2.55% late Thursday. The return on the two-year note also increased, to 0.83, from 0.82.

Since the start of the recession in December 2007, as recently announced by the National Bureau of Economic Research (see “Congratulations, It's A Recession”), the number of unemployed persons increased by 2.7 million, and the unemployment rate rose by 1.7 percentage points with two-thirds of these losses sustained in the last 3 months.

Joel Naroff, president of Naroff Economic Advisors, saw November's job losses as a sign that the economy is worsening at a faster than expected rate. "The labor market is in great trouble. Batten down the hatches because the ship is filling with water quick," he said. "The breadth of the job losses across industries is evidence that businesses all through the economy are reacting at the same time. We're seeing outsize job losses and will see more in the coming months because every business knows what's going on, and they're adjusting very rapidly."

The "outsize losses" are "the cost of technology," Naroff remarked, as instant access to information allows businesses of all sizes to react on a hair trigger to live economic data. However, he believes there is an upside: "The period of job losses may actually be shorter than in previous cycles as a result of the compression of the adjustment process where we all reacting at the same time."

The government also reported that wages rose 7 cents per hour, or 0.4%, in November. As unemployment continues to mount, it is likely that pay increases will be tempered in the months ahead.

The ADP Employer Services had a more coservative estimate of losses to the American job market Wednesday, when it reported that 250,000 jobs had disappeared during the month of November. (See “ADP Points Way Down On Payrolls Figures.") The Fed's Beige Book, which was released Wednesday, also reflected slumping economic activity. (See "Beige Book Bleak.")

Monday's official confirmation that the American economy has been contracting was not a huge surprise, considering the copious signs indicating a slowdown that had preceded it. Payroll employment has declined every month in 2008. Housing prices will have plunged an estimated 10.0% nationally this year, with more declines expected in 2009. U.S. gross domestic product first declined in the fourth quarter of 2008.

The confluence of worrying indicators has pushed consumer confidence to the steepest decline on record in October. This widespread pessimism has put the brakes on spending for everything from automobiles to holiday gifts, hurting businesses further. The competition for scarce dollars has lead to price cutting that some warn could point to a vicious deflationary cycle like that of the Great Depression, should a widespread drop in prices occur.

China is scrambling to prop up its economy. The People's Bank of China made a 108-basis-point cut to interest rates on Wednesday after the markets closed, accelerating its recent policy of monetary loosening in the face of slowing exports and industrial production.

Though a rate cut was expected by the central bank, its magnitude--the largest since the Asian financial crisis in October 1997--was surprising. "Bottom line is the Chinese authorities think the economy is slowing down fast," said Nigel Rendell, a senior emerging market strategist at RBC Capital Markets. "It would not be unusual to cut by around 25 basis points--to do more than four times that highlights the downside risks."

Commodities firmed up on expectations of stronger demand from China, following the lowering of interest rates. Crude futures jumped $2.24, to $53.01 a barrel, on the Nymex; copper futures were up 6 cents, at $1.7140 a pound.

Earlier this week, the World Bank cut its forecast for economic growth in China to 7.5%, from 9.2%, though many economists expect an even slower rate of expansion, of anywhere between 2.0% and 7.0%.

This is the fourth time in three months that Beijing has reduced Chinese interest rates, but the several prior reductions, in October and August, were by just 27 basis points each time. China's benchmark rate now stands at 2.52%. The central bank also lowered its reserve requirements by 200 basis points for large banks and by 100 basis points for smaller banks on Wednesday.

The government has meanwhile been shifting fiscal gears as well, announcing on Nov. 9 a $586.0 billion fiscal stimulus plan. China is keenly monitoring the economic moves made by its key export partner, the United States, where consumer spending has recently slowed. (See "Americans Earn More, Spend Less.") Exports represented 37.1% of China's nominal gross domestic product in 2007. "I think China is looking at what's happening to consumers in the U.S. and what is likely to happen in the coming months," said Rendell. "They see house prices down, equity prices down and people being made unemployed."

China's economy is also still feeling the impact of previous measures that Beijing made to cool the economy and keep a lid on inflation; it was tightening monetary policy in the first half of this year, when the economy appeared to be growing too quickly. But in October, a lower than expected level of imports for the month showed that China was not picking up the slack from slowing economies elsewhere. (See "China's Disquieting Trade Surplus.")

China's currency actually strengthened slightly after the rate cut: the U.S. dollar bought 6.82 yuan late Wednesday in Beijing, down from the 6.83 yuan it bought on Thursday.

Rendell expects the currency to stay between 6.80 and 6.90 against the dollar, which is the range around which it has hovered since June. If exports suffered more markedly, the analyst said Beijing might let the yuan weaken further in 2009. But, given that China still has a notable current account deficit, there would undoubtedly be strong international pressure to keep it from going down that route any time soon, which would put struggling exporters in the West at a disadvantage.