WASHINGTON - The nation's unemployment rate bolted to 7.2 percent in December, the highest level in 16 years, as nervous employers slashed 524,000 jobs, capping one of the worst years in modern history for American workers.

The Labor Department's report, released Friday, underscored the grim toll the deepening recession is having on workers and companies. And it highlights the difficulty President-elect Barack Obama faces in resuscitating the flat-lined economy. This year has gotten off to a rough start with a flurry of big corporate layoffs, pointing to another year of hefty job reductions.

For all of 2008, the economy lost a net total of 2.6 million jobs. That was the most since 1945, when nearly 2.8 million jobs were lost. Though the U.S. labor force has more than tripled since then, losses of this magnitude are still being painfully felt.

With employers throttling back hiring, the nation's jobless rate averaged 5.8 percent last year. That was up sharply from 4.6 percent in 2007 and was the highest since 2003.

While economists were forecasting even more payroll reductions in December - around 550,000 - job losses in both October and November turned out to be deeper than previously estimated. Revised figures showed employers slashed 584,000 positions in November and 423,000 in October.

The unemployment rate, meanwhile, rose from 6.8 percent in November, to 7.2 percent last month, the highest since January 1993. Economists were expecting the jobless rate to rise to 7 percent.

Losses were widespread in December. Construction companies slashed 101,000, and manufacturers axed a a whopping 149,000 jobs. Professional and business services got rid of 113,000 jobs. Retailers eliminated nearly 67,000 jobs, and leisure and hospitality reduced employment by 22,000. That more than swamped gains in education and health care, and the government.

All told, 11.1 million people were unemployed in December.

Employers are chopping costs as they try to cope with dwindling appetite from customers in the U.S. as well as in other countries, which are struggling with their own economic problems.

Not only are employers cutting jobs; they also are cutting workers' hours. The average work week in December fell to 33.3 hours, the lowest level on records dating to 1964.

And the number of people who work part time - a category that includes those who would like to work full time but whose hours were cut back or those who were unable to find full-time work - jumped to 8 million in December, from 7.3 million in November.

Workers with jobs saw modest wage gains.

Average hourly earnings rose to $18.36 in December, up 0.3 percent from the previous month.