The slump in credit to $2.46 trillion was more than anticipated and followed a revised $4.2 billion drop in October, Federal Reserve figures showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease of $5 billion. The figures track credit card debt and non-revolving loans, such as those to buy autos.

A labor market that's shed 7.2 million jobs since the recession started in December 2007 is restraining consumer spending that accounts for about 70 percent of the economy. Fed policy makers have said tighter bank lending standards and reductions in credit lines are hampering the recovery.

"Double-digit unemployment is eroding consumer confidence and the uncertainty is prompting consumers to pay down their credit card debts," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. "We have not seen such a wholesale reduction in consumer credit since the last time we had double-digit unemployment rate following the early '80s recessions."

The series of 10 straight declines in consumer credit was the longest since record-keeping began in 1943.

Sales at U.S. retailers rose more than forecast in November, a sign consumer spending is gathering speed heading into 2010. The 1.3 percent increase followed a 1.1 percent gain the prior month that was smaller than previously estimated, Commerce Department figures showed today in Washington. Purchases excluding autos climbed 1.2 percent, also more than anticipated and the biggest gain since January.

Households have kept buying automobiles even after government incentives expired, showing the biggest part of the economy was weathering the worst employment slump in the postwar era. The Obama administration is proposing new initiatives in a bid to create jobs, while Best Buy Inc. is among retailers using discounts to lure budget-conscious holiday shoppers.

"Consumer spending continues to surprise on the upside as the economy moves further away from the end of the recession," Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. In New York, said before the report. "The labor market is showing signs of stabilization and this is giving consumers greater confidence to spend a little more."

The outlook for the home market dimmed this week as residential construction and mortgage applications fell and loan delinquencies reached a record. "I don't think the housing crisis is over," Mark Zandi, chief economist with Moody's Economy.com, said in a telephone interview. "I think we’re going to see another leg down."

New home sales may begin to pick up by the start of the so-called spring selling season, said Toll Brothers Inc., the largest U.S. luxury homebuilder. Existing house sales may take longer. Residential construction and property sales led the way out of the previous seven recessions going back to 1960, said David Berson, chief economist of PMI Group, the mortgage insurer in Walnut Creek, California.

Mortgage applications for home purchases fell to a 12-year low last week and foreclosures rose to record highs in the third quarter, according to reports from the Mortgage Bankers Association. An index measuring November homebuilder confidence came in lower than the median forecast of 45 economists this week. The Commerce Department on Nov. 18 said residential building dropped 11 percent in October to the lowest level since April’s all-time bottom.

"Indeed, because of the horrible economy, younger workers are now competing with more experienced workers for positions traditionally [in] the domain of the young and less experienced," Rep. George Miller, a California Democrat and the committee chairman, said according to prepared remarks. "Until the economy as a whole turns around, younger workers will continue to be hit the hardest."

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Even in good times teens tend to experience higher levels of joblessness: The unemployment rate for the age group was at 16.9% in December 2007 when the recession began. Recessions tend to amplify their disadvantages, such as their lack of work experience. Set against a backdrop of retired workers who were forced to rejoin the workforce to pay bills, parents who've been laid off and are trying to care for children, and adults who have seen their retirement funds evaporate, young people often find it hard to get any sympathy. Particularly when it seems like the only thing they're losing is pocket money.

And yet studies have shown that being shut out of the labor market early in one's career can lead to persistent, negative effects on a person's ability to find a job and earn competitive wages for up to a decade or more.

The Labor Department figures prompted President Barack Obama to say he's working to "explore any and all additional measures" to spur growth, and underscored forecasts for the Federal Reserve to keep its benchmark interest rate near zero through next year.

"This has the potential to put a big stop sign on the road to economic recovery," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. "The harder jobs are to get, the harder and longer this road to recovery is going to be."

Payrolls dropped by 263,000 in September, exceeding the median forecast in Bloomberg's survey, with losses extending from cash-strapped state and local governments to retailers to builders, yesterday's report showed. The jobless rate rose to 9.8 percent from 9.7 percent in August, while working hours matched a record low.

About 40% of stores surveyed across a broad swath of retailing, including consumer-electronic chain Best Buy Inc., teen-retailer American Eagle Outfitters Inc., and luxury-goods seller Saks Inc., told the Hay Group, a human resources consulting firm, that they expect to hire between 5% and 25% fewer temporary workers this year than last, when the recession forced many retailers to trim staff in response to falling sales.

That's a grimmer outlook than the Hay survey found a year ago, when 29% of retailers said they would be slashing their holiday workforce. "Our staffing levels will likely be down slightly," said an American Eagle spokeswoman. "We've been focused on creating high levels of efficiency." Saks declined to comment and Best Buy wasn't available to comment. Retailers typically bulk up their staff by up to 10% in the fourth quarter, the period that typically accounts for their biggest sales and profits of the year.

The survey results deal another blow to the retail job market, which has been hurting in the weak economy. Since the recession began officially in November 2007, the retail sector has lost 850,000 jobs, or about 6% of its workforce, according to the Bureau of Labor Statistics. Only construction and manufacturing have lost more jobs. "Retailing employment will take another large hit if this plays out as retailers expect," said Lawrence Katz, a labor economist at Harvard University.

In the most direct measure of job market hopelessness, the bureau has a narrow definition of a group it classifies as "discouraged workers." These are people who have looked for work at some point in the past year but have not looked in the last four weeks because they believe that no jobs are available or that they would not qualify, among other reasons. In August, there were roughly 758,000 discouraged workers nationally, compared with 349,000 in November 2007, the month before the recession officially began.

The bureau also has a broader category of jobless it calls "marginally attached to the labor force," which includes discouraged workers as well as those who have stopped looking because of other reasons, like school, family responsibilities or health issues. But economists agree that many of these workers probably would have found a way to work in a good economy.

There were roughly 2.3 million people in this group in August, up from 1.4 million in November 2007. If the unemployment rate were expanded to include all marginally attached workers, it would have been 11 percent in August.

But even this figure is probably an undercount of the extent of the jobless problem in this country. There are about 1.4 million more people who are not in the labor force than when the recession began. Some of these are retirees, stay-at-home parents, people on disability and students. But it is also rather likely that many of these people have given up looking for work at least partly because of economic reasons as well.

Nonfarm payrolls declined 216,000 last month compared to a revised 276,000 drop in July, the Labor Department said Friday. The August drop is smaller than the 233,000 decline economists in a Dow Jones Newswires survey had expected.

Even though the loss is huge by historical standards, it's an improvement; monthly job cuts earlier in the year totaled as much as 700,000. The economy has lost 7.4 million jobs since the recession started in December 2007.

The unemployment rate, calculated using a survey of households as opposed to companies, grew to 9.7%, the highest level since June 1983 when the rate was 10.1%. In July, the unemployment rate had declined for the first time since April 2008. The unemployment rate was under 6% less than one year ago. Data on U.S. employment has grown more mixed of late. While there has been improvement, economists expect a labor market recovery will be fairly sluggish. Meanwhile, U.S. Federal Reserve officials have grown more confident that the worst economic downturn in decades is ending. According to minutes of the August meeting held by the Fed's policy panel, Fed officials see growth resuming this year, and they expect the recovery to pick up in 2010. But they point out that the economy remains vulnerable to shocks.

The problem is that many of the people one would think of as "unemployed" are not included in this unemployment rate. For one, the Bureau of Labor Statistics does not count unemployed people who have been discouraged by the labor market and have given up looking for work. You are counted as a "discouraged worker" if you are available to work, want to work, and tried to look for work in the past year but gave up within four weeks for reasons including the belief that no work is available. The fact that the national unemployment rate excludes these discouraged workers has led many observers to believe it does not reflect the "real" level of unemployment. "Ask the average person if he or she is unemployed, and there is little hesitation in giving you an answer, but that may not agree with government definitions," says John Williams, an economist who examines government statistics at shadowstats.com.

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So if you care not just about people who meet the official definition of "unemployed" but also about people who are dropping out of the labor force, 2009 seems to be trailing 1982 in terms of the health of the labor market. Williams says that when he takes into consideration people who haven't looked for work in more than a year because they can't find jobs, the real unemployment rate today goes all the way up to 20.6 percent by his calculations. "It won't take much to get it to the worst since the Great Depression," he says.

American consumers appear so shaken by the worst recession since the Great Depression -- and so pinched by unemployment, stagnant wages and stingier lenders -- that they are reining in spending on all but basics. Economists also see an upturn in U.S. household saving as the beginning of a prolonged period of thrift.

The retailers' reports serve as a reminder of how it will be consumers, foremost, who will fuel a sustained U.S. recovery. Consumer spending accounts for about 70% of all demand in the U.S. economy.

Most economists expect the economy to resume growing in the second half of this year at a modest pace, as U.S. businesses rebuild depleted inventories and the housing market stabilizes. Economists who see a second-half rebound point to a global-manufacturing revival and recent reports that the economies of France, Germany and Japan managed to expand in the second quarter. The Commerce Department said earlier this month that U.S. exports in June rose 1.9% from May after rising 1.6% the month before.

But U.S. consumers could be the counterweight. In a survey of economists this month, The Wall Street Journal asked if a substantial increase in consumer spending was needed for sustained growth. Of the 43 economists who responded, 60% said yes. "Not only has employment fallen, but a lot people are facing salary freezes or other cutbacks," said Lou Crandall, chief economist of financial-research firm Wrightson ICAP. "That is going to have a significant drag on consumer spending going forward."

Speaking on C-SPAN, Christina Romer, chairwoman of the White House Council of Economic Advisers, said that she expected the G.D.P. to begin growing in the fourth quarter of this year. Ben S. Bernanke, the Federal Reserve chairman, made a similar prediction last week.

But Ms. Romer also said that she expected unemployment to rise even after the economy turns, saying that the G.D.P. has to grow at a rate of about 2.5 percent before unemployment will fall. Before that happens, she said, it is "unfortunately pretty realistic" that the unemployment rate could reach 9.5 percent. A reasonable estimate for the G.D.P.'s growth rate in 2010, she said, is three percent.

Robert Reich, who served as labor secretary under President Bill Clinton and advised the Obama campaign, said on Sunday that the rate of growth would have to be higher — 4.5 percent — to reverse rising unemployment. I think that when we talk about — or anybody talks about — hitting bottom, what we really have to understand is that the bottom is a kind of an undefined concept here," he said on ABC's This Week.

According to figures released on Friday, the unemployment rate in April was 8.9 percent, its highest level in a quarter-century. The so-called underemployment rate, which counts people who are working part time because their hours have been cut and those who have given up looking for jobs, reached 15.8 percent.

But what impact does losing a job have on your health? Could a layoff send a perfectly healthy person into a downward spiral of sickness? It's possible, says Kate Strully, a sociologist at State University of New York in Albany. In her new study published in the journal Demography, Strully analyzed a variety of job loss situations — including being fired or laid off or losing a job after the entire company shut down — and found that job loss may indeed trigger serious physical and physiological illness.

Strully used a nationally representative and continually updated data set known as the U.S. Panel of Study of Income Dynamics (PSID), which surveys people around the country each year on their employment status and their self-reports of health, among other things. Strully used data from 1999, 2001 and 2003 to track people's job status and the impact on each person's health 18 months later. Since previous studies on employment and health suffered from a chicken-or-egg conundrum — researchers could never be sure whether the stresses and strains of unemployment led to poorer health, or whether people's poor health led to missed work days and lower productivity, which contributed to job loss — Strully focused on people who reported having lost their job due to factors out of their control, such as the entire company shutting its doors.

She found that among people unemployed under these circumstances and who did not report any health problems prior to losing their job, 80% were diagnosed with a new health problem — ranging from hypertension and heart disease to diabetes — 18 months later. (Not surprisingly, those who started out with one or more of the conditions asked about on the survey were 54% more likely to lose their job within a year and half, for any reason, than those who did not report any health problems.) The most commonly reported conditions among this group were high blood pressure, arthritis and other cardiovascular-related problems. "Job loss leads to a lot of physiological changes," says Strully, who conducted her study as a Robert Wood Johnson Health and Society Scholar. "That's definitely what this suggests."

More intriguing was the long-term effect job loss appeared to have. Even if some of these people found new jobs soon after losing their first one, they were more likely to retain the legacy of poor health from having once been unemployed. "People who lost their job and were re-employed within a year and half also reported increased onset of new health problems," she says. "They shouldn't have had the most severe experiences of unemployment and income loss, and still we see them having new health issues."

But why is that a bad thing? After all, many workers are accepting pay cuts in order to save jobs. What's wrong with that? The answer lies in one of those paradoxes that plague our economy right now. We're suffering from the paradox of thrift: saving is a virtue, but when everyone tries to sharply increase saving at the same time, the effect is a depressed economy. We’re suffering from the paradox of deleveraging: reducing debt and cleaning up balance sheets is good, but when everyone tries to sell off assets and pay down debt at the same time, the result is a financial crisis.

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In particular, falling wages, and hence falling incomes, worsen the problem of excessive debt: your monthly mortgage payments don't go down with your paycheck. America came into this crisis with household debt as a percentage of income at its highest level since the 1930s. Families are trying to work that debt down by saving more than they have in a decade -- but as wages fall, they're chasing a moving target. And the rising burden of debt will put downward pressure on consumer spending, keeping the economy depressed.

Things get even worse if businesses and consumers expect wages to fall further in the future. John Maynard Keynes put it clearly, more than 70 years ago: "The effect of an expectation that wages are going to sag by, say, 2 percent in the coming year will be roughly equivalent to the effect of a rise of 2 percent in the amount of interest payable for the same period." And a rise in the effective interest rate is the last thing this economy needs.

Concern about falling wages isn't just theory. Japan — where private-sector wages fell an average of more than 1 percent a year from 1997 to 2003 — is an object lesson in how wage deflation can contribute to economic stagnation.

About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on their loan payments or in the foreclosure process as job losses intensified a housing crisis spawned by lax lending practices, the Mortgage Bankers Association said on Thursday.

With unemployment at a 16-1/2-year high and expected to continue rising until mid- to late 2010, more borrowers will pay late or fall into foreclosure this year, said the group's chief economist.

"While California, Florida, Nevada, Arizona and Michigan continue to dominate the delinquency numbers, some of the sharpest increases we saw last quarter in loans 90 days or more delinquent were in Louisiana, New York, Georgia, Texas and Mississippi, signs of the spreading impact of the recession," said Jay Brinkmann.

Duress is no longer isolated to borrowers with lower credit quality. As joblessness grew, so did late payments on prime fixed-rate loans that represent two-thirds of mortgages.

The nation's unemployment rate bolted to 8.1 percent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs. Both figures were worse than analysts expected and the Labor Department's report shows America's workers being clobbered by a relentless wave of layoffs. The net loss of jobs in February came after even deeper payroll reductions in the prior two months, according to revised figures. The economy lost 681,000 jobs in December and another 655,000 in January.

Since the recession began in December 2007, the nation has lost 4.4 million jobs. Employers are shrinking their work forces at alarming clip and are turning to other ways to slash costs — including trimming workers' hours, freezing wages or cutting pay — because the recession has eaten into their sales and profits. Customers at home and abroad are cutting back as other countries cope with their own economic problems.

Job losses were widespread in February. Construction companies eliminated 104,000 jobs. Factories axed 168,000. Retailers cut nearly 40,000. Professional and business services got rid of 180,000, with 78,000 jobs lost at temporary-help agencies. Financial companies reduced payrolls by 44,000. Leisure and hospitality firms chopped 33,000 positions.