Unemployment in San Diego County increased from November to December for the first time in more than 17 years, raising worries among economists that the county could enter, or is already in, a recession.

Fourth-quarter unemployment rates typically decline as retail companies ramp up in preparation for the holiday season. Instead, the jobless rate increased 0.1 percentage point from November to 4.9 percent, almost a full percentage point jump from March, according to data from the state's Employment Development Department.

The unusually steady increase in unemployment through the end of the year has convinced at least one economist that the county is in the middle of a recession.

"We've probably been in a recession for the last couple months," said Hirsham Foad, an economics professor at San Diego State University. "If you just look around, people are spending less and a lot of the leading indicators are pointing toward recession."

Economists closely follow unemployment rates because job losses tend to have a ripple effect throughout the economy - layoffs force people to spend less, causing business to contract, Foad said.

He and other economists say they are are concerned the rate has escalated significantly from March's 4.0 percent during a time period that usually sees jobs added to the economy.

The county has never before seen an unemployment rate increase from November to December, according to the state data, which dates back to 1990.

"It is a significant increase because it shows a level of what I call chronic unemployment," said Murtaza Baxamusa, director of research at the Center on Policy Initiatives, based in San Diego. "This is a structural decline. It's not a temporal or seasonal decline."

A fundamental cause for the economic slowdown and unemployment increase is that the subprime crisis has pracitically frozen lending and eliminated second mortgages, which has significantly hurt consumer spending, Baxamusa said.

"It's not just (subprime) anymore," he said. "It's affecting almost every sector of the economy."

Other economists, such as Marney Cox with the San Diego Association of Governments, said they are confident the local economy will avoid a recession.

Jobs in the county did increase by 14,100 over the year but that was not enough to keep up with the population growth, leading to a year-over-year unemployment rate increase of 1.2 percentage points.

A rate of 4.9 percent unemployment is still relatively low, with 5 percent considered full employment, said Kelly Cunningham, an economist with the San Diego Institute for Policy Research.

By comparison, the state's unemployment rate for December increased to 5.9 percent while the national rate ticked up to 4.8 percent.

Cunningham said he believes the local economy will avoid a recession because of its diverse nature with strong industries such as health care, technology and tourism.

"We're definitely in a slowdown. And if it slows down enough, we could enter a recession, but I think that's more likely on a national level than locally in San Diego," he said. "We went into this slowdown in real estate and construction before the rest of the nation, so the good thing about that is I think we'll come out of this slowdown by the end of 2008 while the rest of the nation will still be sluggish."

Job losses in construction and real estate were offset by increases in retail and government employment. Still, the holiday season bump was not enough to prevent the rise in the county's joblessness rate.

Government jobs were the second-largest county contributor behind retail in December, adding 1,000 jobs. Economists said that sector will change from a job booster to a drain over the course of the year as the state wrestles with a $3.3 billion deficit.

The county's unemployment rate is also expected to break the 5 percent barrier during the first quarter based on seasonal trends, they said.

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.