Unemployment Rate Jumps To 2 1/2-Year High of 7.7%

Russia edged closer to a recession last month as half a million people lost their jobs and real wages and capital investment both fell for the first time in over nine years, data showed on Tuesday.

The number of unemployed jumped by some 500,000 in December to 5.8 million, taking the unemployment rate to a 2 1/2-year high of 7.7 percent.

As Russia heads for its worst economic crisis since the 1998 default, officials have warned of the possible threat of public unrest if the economic situation worsens.

Companies have responded to a tougher global environment by slashing production, staff, wages and working hours. Companies that announced job cuts in late 2008 include real estate developers, technology company Sitronics, petrochemical firm Sibur and hydroelectric power producer RusHydro.

Others, like coal miner Mechel, have cut working hours.

Companies also slashed spending plans, and ordinary Russians started to feel the pinch.

The average monthly wage fell an annual 4.6 percent in December to 17,112 rubles ($517.85), the first contraction since October 1999 when they fell 2.2 percent. Disposable income fell 11.6 percent, the biggest contraction since August 1999, the statistics service said.

"The economy will be in for a painful adjustment this year, and we foresee a further stream of grim economic news in the coming months when the effect of the crisis is expected to become even more pronounced," Ivan Tchakarov, economist at Nomura, said in a research note.

As inflation-adjusted wages fell, ordinary Russians have become more cautious about spending habits, with year-on-year retail growth slowing sharply to a nine-year low of 4.8 percent.

(Reuters, Bloomberg)