Just when it was beginning to look a little better, the economy relapsed Friday with a return to double-digit unemployment for only the second time since World War II and warnings that next year will be even worse than previously thought.

The jobless rate rocketed to 10.2 percent in October, the highest since early 1983, dealing a psychological blow to Americans as they prepare holiday shopping lists. It was another worse-than-expected report casting a shadow over the struggling recovery.

President Barack Obama called it "a sobering number that underscores the economic challenges that lie ahead." He signed a measure to extend unemployment benefits and to expand a tax credit for homebuyers.

Economists had not expected the 10 percent mark to come so quickly and immediately darkened their forecasts. Mark Zandi, chief economist at Moody's Economy.com, and Joshua Shapiro, chief U.S. economist at MFR Inc., predicted the rate will peak at 11 percent by mid-2010. They earlier had projected 10.5 percent.

Troubles for small businesses could have a disproportionate effect on the economy, because they account for about 60 percent of the nation's jobs. They tend to rely on credit cards and home equity lines -- both of which banks have tightened -- for cash flow.

And the unemployment rate doesn't include people without jobs who have stopped looking, or those who have settled for part-time jobs. Counting those people, the unemployment rate would be 17.5 percent, the highest since at least 1994.

Economists had expected unemployment to rise to no more than 9.9 percent, up just a tick from September's 9.8 percent, and the surprising jump added to fears that the recovery could fizzle if Americans don't spend.

Prospects that the government might pass a second stimulus bill appear dim. Congress is already grappling with sweeping health care legislation, raising concerns about further swelling the federal deficit.

"More debt, more spending ... clearly has not worked -- particularly in a time of double-digit unemployment," said Senate Republican leader Mitch McConnell of Kentucky. Democrats said the economy would have been in worse shape without the first stimulus.

October was the 22nd straight month the U.S. economy has lost jobs, the longest on record dating back 70 years. Losses at factories, construction companies, retailers and financial services companies far outweighed gains in education and health care, professional and business services and elsewhere. Government payrolls were flat.

One faint sign of hope: Temporary employment grew by 33,700 jobs, its third straight month of gains after steep losses earlier this year. Employers are likely to add temporary workers before hiring permanent ones.

What recovery? Unemployment shoots past 10 percent
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