WASHINGTON, Jan 11: US firms unexpectedly cut 101,000 jobs in December, the government said on Friday, raising economic fears as President George W. Bush campaigned for a new growth package.

It was the steepest fall in jobs since February of last year, the Labour Department said.

The unemployment rate in December was unchanged from the previous month at 6.0 per cent.

The figures, which defied economists’ expectations for a modest increase in employment, appeared to show that firms were hunkering down because of weak profits and US-Iraq tensions, analysts said.

“Given the concerns about a possible war, regulatory risks and limited profitability gains, flat employment numbers should come as no surprise at all,” said Wachovia Corp. chief economist John Silvia.

The grim jobs report followed Bush’s announcement on Tuesday of a 10-year, 674 billion dollars economic stimulus package, which is expected to face an uphill battle in the Senate.

“The president remains very concerned about the potential for a jobless recovery,” Fleischer told reporters at the White House after the employment figures were released.

Bush says his proposals for speedy tax cuts and abolishing dividend taxes, will create 2.1 million jobs over the next three years.

The plan calls for 3.6 billion dollars to go to “personal re-employment accounts” that job seekers can use to defray expenses such as job training, child care or transportation.

Vice President Dick Cheney told business leaders here that the Bush plan would increase business investment, consumer spending and help both the markets and jobless.

“We urge Congress to act swiftly to pass this package,” Cheney said.

Bush’s plans would help alleviate some of the pain in the labour market, said Sal Guatieri, Chicago-based economist at Bank of Montreal.

“But it is still a very disappointing picture all the way around,” he added. “It is currently indicating very poor business confidence and definitely raising a downside risk to the economic outlook.

The jobs axe fell particularly hard on retail workers.

Retailers shed 104,000 jobs in December, the sharpest decline in a year, as they hired fewer workers than usual for the Christmas holiday shopping season.

Manufacturers slashed 65,000 jobs in December, bringing losses in that sector to nearly 600,000 in 2002.

But service-sector employment rose by 73,000 and construction jobs rose 3,000.

The total number of people without a job rose 82,000 to 8.59 million in December, according to a separate Labour Department survey.—AFP