The unemployment rate rose to 9.8 percent in September as employers cut far more jobs than expected, evidence that the longest recession since the 1930s is still inflicting widespread pain.
The official jobless rate stopped short of topping 10 percent only because the Labor Department doesn't count people who have given up looking for work or settled for part-time jobs.
More than a half-million unemployed people gave up looking for work last month. If laid-off workers who have settled for part-time work or have given up looking for new jobs are included, the unemployment rate rose to 17 percent, the highest on records dating from 1994.
The Labor Department said Friday that the economy lost a net total of 263,000 jobs last month, up from a downwardly revised 201,000 in August. That's above Wall Street economists' expectations of 180,000 job losses, according to a survey by Thomson Reuters.
The unemployment rate rose from 9.7 percent in August, matching expectations.
All told, 15.1 million Americans are now out of work, the department said. And more than 7.1 million jobs have been eliminated since the recession began in December 2007.
Obama is calling the latest jobless figures a sobering reminder that progress to reverse the recession comes in fits and starts.
He says the new unemployment numbers also serve as a reminder that the country needs to "grind out this recovery step by step."
The president says employment is often the last indicator to show that a recession is over, and he is promising that his administration is doing everything it can to accelerate that process.
But figures pose a serious problem for Obama, who had claimed his $787 billion stimulus bill would keep the unemployment rate below 8 percent in an effort to get it passed earlier this year. Now Republicans, who were nearly unified in opposing the spending package, are using the latest figures as evidence that the stimulus failed.
"Since President Obama signed his stimulus bill into law, millions of Americans have found themselves out of work," House Minority Whip Eric Cantor, R-Va., said in a written statement released just minutes after the report came out.
"Continued job loss does not equal success despite claims to the contrary, and the American people deserve stronger economic leadership," he continued. "Families across the country are struggling to cut costs and cope with a tough job market, and they see a massive disconnect between that reality and the President's claim of success and continued spending."
Vice President Biden defended the stimulus package Friday, saying the economy would be in far worse shape without it. But he added that while the pace of layoffs has slowed, the Obama administration is not satisfied.
"We don't think that less bad is good," he said from the White House. "Less bad is not our measure of success. One job lost is one job too many and too much pain."
Biden said efforts to accelerate stimulus spending need to be "redoubled" in the weeks ahead.
"Today's bad news does not change my confidence in the fact that we are going to recover," he said. "We will be producing jobs, the American economy and the job engine is going to be created and moving once again and I believe we're doing the right things to move things in the right direction."
But House Minority Leader John Boehner, R-Ohio, called on Democrats to "scrap their job-killing agenda and act in a bipartisan way to put Americans back to work."
"With roughly three million private sector jobs lost since the 'stimulus' was enacted, Americans can't be blamed for asking, 'where are the jobs?'" Boehner said in a written statement.
"Instead of coming to their senses, Democrats are pressing ahead with, among other costly proposals, a national energy tax and a government takeover of health care," he added. "Make no mistake, these initiatives would destroy jobs and place additional burdens on working families and small businesses."
GOP Conference Chairman Mike Pence of Indiana cited the figures in his call for fiscal discipline and tax relief for working families, small businesses and family farms.
"As unemployment continues to climb, we are reminded again that wasteful government spending is not the solution to what ails the economy," he said in a written statement.
Many analysts expect the economy grew at a healthy clip in the July-September quarter, technically ending the recession, but few think the recovery will be strong enough to lower the jobless rate. Most economists expect the rate to top 10 percent and keep climbing.
The economy has received a boost from the Cash for Clunkers auto rebate program and other government stimulus efforts, but many economists believe that growth will slow in the current quarter and early next year as the impact of those programs fade.
Federal Reserve Chairman Ben Bernanke said Thursday that even if the economy were to grow at a 3 percent pace in the coming quarters, it would not be enough to quickly drive down the unemployment rate. Bernanke said the rate is likely to remain above 9 percent through the end of 2010.
Persistently high unemployment could weaken the recovery as consumers, concerned about their jobs and incomes, restrain spending. Consumer spending accounts for about 70 percent of the nation's economy.
Hourly earnings rose by a penny last month, while weekly wages fell $1.54 to $616.11.
The average hourly work week fell back to a record low of 33 in September, the department said. That figure is important because economists are looking for companies to add more hours for current workers before they hire new ones.
The uncertainty that surrounds the recovery has made employers reluctant to hire. The Business Roundtable, a group of CEOs from large corporations, said earlier this week that only 13 percent of its members expect to increase hiring over the next six months.
While job losses have slowed since the first quarter of this year when they averaged 691,000 a month, the cuts actually worsened last month in many sectors compared with August.
Construction jobs fell by 64,000, more than the 60,000 eliminated in August. And service sector companies cut 147,000 jobs, more than double the 69,000 in the previous month. Retailers lost 38,500 jobs, compared to less than 9,000 in August.
Temporary help agencies eliminated 1,700 jobs, down from the previous month, but still a sign of labor market weakness. Economists see temporary jobs as a leading indicator, as employers are likely to hire temp workers before permanent ones.
The Associated Press contributed to this report.