The economy generated only 18,000 new jobs in December, and the unemployment rate increased to 5% from 4.7% in November, the Labor Department reported this morning. The jobs numbers were worse than expected on Wall Street, which sent the stock markets down sharply during midmorning trading.

The weak jobs data led to speculation on the street that the door is wide open now for the Federal Reserve Open Market Committee to again slash its benchmark interest rates when it meets at the end of this month.

Job growth in services, including professional and technical services, health care, and food services, was largely offset by job losses in construction and manufacturing, the Labor Department said. Average hourly earnings rose by 7 cents, or 0.4%.

Employment in construction fell by 49,000 in December, with losses occurring throughout the industry. Since its peak in September 2006, construction employment has fallen by 236,000, with the residential components accounting for the decline, according to the Labor Department.