The official statistics from the Bureau of Labor Statistics showed 533,000 jobs were lost in November, the steepest monthly drop in more than three decades. At the time, many economists assumed that would be the worst month in the ongoing recession, yet with another 500k jobs expected to disappear in December, the final month of 2008 won't be a turning point.

In fact, following the release of the ADP private employment report on Wednesday morning, which showed broad job cuts across all industries, many economists are expecting December payrolls to print one of the deepest monthly cuts ever.

Scott Anderson, senior economist for Wells Fargo, revised his forecast down by 100k to -600,000 upon the release of the ADP survey, which he said indicates that conditions were worse compared to November.

"What we expect to see is a sharp drop in service employment, which is a recent phenomenon in the payrolls numbers," Anderson said, noting the historic lows seen in the ISM non-manufacturing index. "That plays a big part in our labour market - about 85% of payrolls in the U.S. are based on the service industry."

Anderson also said manufacturing jobs will be cut back by "at least 120,000," partly on account of auto shutdowns. He added that the construction sector could see equally dismal results.

At Scotia Capital, Derek Holt is expecting to see 750,000 jobs vanish in December - the most pessimistic forecast of the 70 economists polled by Bloomberg. With the exception of September 1945, Holt notes "that would be the single biggest monthly drop in history."

Other analysts aren't sure conditions are that bad, however.

The forecasting team at Goldman Sachs said the ADP survey, which has overestimated employment since the economic downturn began, should be closer to the mark now that it has been revamped to better assess labour conditions, but they were hesitant to downgrade an already-pessimistic forecast.

"The history on this report is spotty to say the least," they said. "So while we will consider whether to change our forecast for nonfarm payrolls, at the moment we keep it at -550,000."

Overall, predictions for nonfarm payrolls range widely from a quarter-million losses to 750,000, and each of the forecasts updated after the ADP survey are more pessimistic than the consensus expectation.

"If we assume that governments added say 20-odd thousand jobs, then this morning's number would correspond to a decline of about 670,000 or so for total employment," said Joel Prakken, chairman of Macroeconomic Advisers and spokesman for the ADP report.

Looking farther ahead, Prakken predicts the economy will shed another 2 million jobs in 2009, with the unemployment rate peaking at 8.4% when the labour market stabilizes in late 2009.

When 2008 began, the unemployment rate was just 4.9%. As the recession spread throughout the economy, job cuts forced the rate up to 6.7% - the worst pace since 1993 - and economists expect to see a 7.0% print to end the year.

The Federal Reserve said as much in the minutes of the latest monetary policy meeting, which revealed the U.S. central bank believes unemployment rates are "likely to rise significantly into 2010."

Another bit of data pointing towards major losses in the month is the weekly jobless claims report. The four-week average for unemployment benefits at the end of December was 552,250 initial claims, which compares unfavourably to the November average of 524,500 claims each week.

The BLS figures will be released Friday at 8:30 a.m. EST.

By Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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