Unemployment Hits 5 Percent on Low Job Creation

Unemployment is now at a two-year high of 5 percent, as the Labor Department's latest jobs report shows that very few jobs were added to the U.S. economy in December. The news, released Friday, will likely raise more fears of a recession.

Economists had been expecting a net increase of about 70,000 jobs. Instead, the economy added only 18,000 jobs. The numbers are the worst reported for a month since August 2003.

The construction, manufacturing and retail sectors all lost jobs in December, while health care and professional services came in on the positive side.

The poor showing leaves many wondering how the Federal Reserve will react. Many Wall Street analysts are hoping for a sizable rate cut. But inflation worries may limit the size of such a cut.

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