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-- WRAPUP 4-Weak jobs report raises concern on U.S. economy -- (Updates with market close; adds consumer credit data, Fed poll) By Tim Ahmann WASHINGTON, Dec 6 (Reuters) - The U.S. unemployment rate unexpectedly soared to 6 percent in November, revisiting an eight-year high hit in April in a troubling sign for the economy. In a surprisingly weak jobs report on Friday, the Labor Department also said employers hacked their payrolls last month by the largest amount since February. "This report suggests the U.S. economy is deteriorating," Moody's Investors Service top economist John Lonski said. The downbeat data, coupled with the sudden resignations of U.S. Treasury Secretary Paul O'Neill and top White House economic aide Lawrence Lindsey, roiled financial markets which had recently grown more hopeful about the economic outlook. U.S. stock markets opened sharply lower but closed in positive territory as investors viewed the Bush team shake-up as boosting the odds for a large fiscal stimulus package. The Dow Jones industrial average closed up 22 points at 8645, while the tech-heavy Nasdaq rose 11 points to 1422. At the same time, the Treasury market rallied on belief the Federal Reserve would hold interest rates low for longer than had been expected, if not cut them further. The report showed a three-tenths of a percentage point jump in the November jobless rate to 6.0 percent, its highest level since April. The increase easily outstripped economists' expectations for a gain to only 5.8 percent. At the same time, the number of workers on U.S. payrolls outside the farm sector tumbled by 40,000 last month, a worrisome showing compared to an expected gain of 38,000. "These numbers are a complete shock and give the impression of an economy toppling over again," said Ram Bhagavatula, chief economist at Royal Bank of Scotland Financial Markets. Before April, the last time the jobless rate had been this high was in August 1994, more than eight years ago. Labor Secretary Elaine Chao said the report did not fit well with other signs suggesting the economy was improving. "It's all over the ballpark," Chao told cable network CNBC. "The economy is out of its doldrums but as to where it's going over the next few months, it's still a little questionable." Democrats seized on the disappointing jobs figures to pound Republicans for a failure to extend aid to jobless workers who will soon drop off the benefit rolls. The report also bolstered arguments from Republicans that tax cuts are needed to make sure the wobbly recovery does not fall off the rails. A separate report from the Fed on consumer credit suggested shoppers were turning more cautious as the holiday shopping season approached. The Fed said consumer credit outstanding rose only $1.5 billion in October after gaining a revised $4.7 billion a month earlier. October's rise fell well short of the $6.9 billion increase expected on Wall Street. In addition, September's figure was revised down sharply from an originally reported $9.9 billion. RATE DEBATE The reports came just days before the Fed's next policymaking meeting. The central bank cut short-term interest rates a hefty half-percentage point last month to a fresh four-decade low of 1.25 percent, saying the move should help the economy through a "soft spot." The Fed is widely expected to hold rates steady at its meeting on Tuesday. But some economists said the jobs numbers suggested the "soft spot" might be more of a quagmire than hoped, raising the possibility further cuts in the benchmark federal funds rate may be needed down the road. A Reuters poll of 20 large Wall Street firms that deal directly with the Fed in the markets found none looking for a rate reduction next week. However, five of the firms expect at least another quarter-point cut by mid-2003. Former Fed governor Lyle Gramley said that while weak, the jobs report was not weak enough to change the Fed's thinking. "The Fed will be looking at other indicators suggesting that some improvement may be taking place in economic growth early next year and so it will be content to sit and wait ... to see if that materializes," he said. Two separate reports released on Friday -- one from the Foundation for International Business and Economic Research and the other from the Economic Cycle Research Institute -- showed inflationary pressures receded in November. Low inflation has given the Fed ample room to aggressively cut rates in the battle against economic weakness. In fact, some policymakers have worried that a prolonged period of economic slack could lead to a downward drift in inflation that could sap some of the stimulus rate cuts have been providing. SOME POSITIVES In one positive sign, Labor revised up the payrolls figures for October and September. October's count was updated to show a 6,000 rise compared to the previously reported 5,000 drop. In September, jobs fell by 4,000 -- milder than the 13,000 decline reported previously. In addition, the department revised up its reading on the length of the average workweek in October, which coupled with the payroll revision to show the economy was working a bit harder than first thought when the third quarter started. However, the job market in November showed little vitality, with the average workweek holding steady at 34.2 hours. The downtrodden manufacturing sector shed 45,000 jobs last month. Manufacturers have been cutting payrolls for nearly 2-1/2 years. In an indication businesses were remaining cautious in the run-up to the Christmas holiday shopping season, retail jobs sank 39,000. ((Washington newsroom, 202-898-8433, fax 202-898-8383)) ((Xtra clients: Click on topnews.session.rservices.com to see Top News pages in multimedia Web format. If you cannot access the pages, ask your IT department to check your Internet firewall settings. For a technical advisory, click on <C9991>.)) (C) Reuters 2002. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world. nN06335164 US/JOBS1 06-Dec-2002 22:43:39 GMT Source RTRS - Reuters News Categories: