Washington ? It’s back to the future for President Bush, who in his last year in office is facing the same challenge he did in his first – the possibility of a recession and how to avert it.

Bush couldn’t stave off a recession in 2001, but his tax cuts helped to cushion the blow. This time around, a tax cut is under consideration again, the White House said after the release of an especially gloomy employment report Friday.

Wary employers clamped down on hiring and pushed the unemployment rate to a two-year high of 5 percent in December, an ominous sign that the economy may slide into recession.

Gripped by uncertainty, government and private employers last month added the fewest new jobs to their payrolls in more than four years. In fact, employment at private companies alone actually declined. The Labor Department’s report provided evidence of an economy greatly strained by a housing slump and a credit crunch.

The disappointing employment figures sent Wall Street into a nosedive, thrust the White House into damage control and ratcheted up the blame game as Republicans and Democrats battle for the presidency. The employment numbers also fanned speculation that the Federal Reserve will have to lower interest rates again. As expected, the Fed took action to make cash more available to banks.

Bush said he is on top of the situation. “We can’t take economic growth for granted,” he said. “There are signs that will cause us to be ever more diligent and make sure that good policies come out of Washington.”

The president said he wants to work with Congress “to deal with the economic realities of the moment and to assure the American people that we will do everything we can to make sure we remain a prosperous country.”

With the odds of a recession increasing, Bush met with his top economic advisers on Friday and was considering the need for an economic stimulation package. The president, who has been plagued by low public approval ratings for his handling of the economy, isn’t expected to make any decisions until later this month. Tax cuts are under consideration, White House spokesman Tony Fratto said. “We’ve done tax cuts before, and it’s led to growth,” he said.

The State of the Union address is Jan. 28, and Bush is likely to unveil his package then.

The civilian unemployment rate jumped from 4.7 percent in November to 5 percent in December, the highest since November 2005 after the Gulf Coast hurricanes dealt the country a mighty blow. Total payrolls – both private employers and government – grew by just 18,000 last month, the worst showing since August 2003, when the economy suffered job losses as it struggled to recover from the 2001 recession.

“This is a major warning shot that the economy is in trouble,” said economist Joel Naroff, president of Naroff Economic Advisors.

The December employment picture was much weaker than expected.