WASHINGTON AND NEW YORK — Spooked by the deteriorating economy, businesses are continuing to shed jobs at an alarming pace, pushing the unemployment rate to 7.6%, its highest level in 16 years.
The government Friday gave its latest damage report: 598,000 jobs lost in January, the biggest for any single month since 1974.
And job losses for November and December were much worse than previously estimated, the Labor Department said, likely reflecting layoffs at smaller firms that are slower to report their data.
"The recession has deepened and we're in the worst part of it now," said Mickey Levy, chief economist at Bank of America in New York.
Many economists expect the job losses to continue for months to come and the unemployment rate to top 9% before improving.
Still, the stock market rallied, with the Dow Jones industrial average rising more than 200 points, as investors looked forward to Monday's expected announcement on President Obama's plan for resuscitating the nation's banks and easing the housing crisis.
Financial stocks led the way up on hopes that Treasury Secretary Timothy F. Geithner will unveil a comprehensive plan that could revive bank lending without having the government nationalize major institutions.
"Any good news -- meaning there's anticipation of a well-thought-out solution for the financial system -- is welcome," said Robert W. Bissell, president of Wells Capital Management in Los Angeles.
Investors also viewed the dreary unemployment numbers as ratcheting up pressure on lawmakers to speed the enactment of the long-awaited economic stimulus package.
The Dow rose for the second day in a row, climbing 217.52 points, or 2.7%, to 8,280.59. The Nasdaq composite index turned positive for the year. A widely followed bank-stock index jumped 12%, with some stocks surging more than 30%.
The buying was driven in part by investors closing out bearish bets against the banking sector in advance of Geithner's announcement.
Shares of Bank of America, which had fallen below $5 this week amid speculation that it could be nationalized, rose $1.29, to $6.13, after Chairman and Chief Executive Kenneth D. Lewis asserted on CNBC that the company wouldn't require additional capital injections from the government.
Still, investors are wary that the bank-rescue plan won't be robust enough or implemented quickly enough.
