US employment growth ground to a halt in August as weakening consumer confidence discouraged already nervous US businesses from hiring.
The figures raised fears about the health of the US economy, and are set to keep pressure on the Federal Reserve to provide more monetary stimulus to aid the economy.
Non-farm payrolls were unchanged, the US Labour Department said today, in the weakest monthly employment report since September.
Employment for June and July was revised to show 58,000 fewer jobs.
The news sent European stock markets lower, with Paris and Frankfurt closing down approximatley 3.5%after the report. US markets were also down almost 2% in early trading.
Despite the lack of employment growth, the jobless rate held steady at 9.1%. The unemployment rate is derived from a separate survey of households, which showed an increase in employment and a tick up in the labour force participation rate.
Private payrolls increased only 17,000 after rising 156,000 in July. Government employment fell 17,000, contracting for a 10th straight month.
The decline in government payrolls was tempered by the return of 23,000 state workers in Minnesota after a partial government shutdown in July.
Details of the employment report were weak, with manufacturing payrolls falling 3,000, reflecting the slump in business confidence.
Factories added 36,000 new workers in July as disruptions to motor vehicle production caused by a shortage of parts from Japan eased.
The average work week dropped to 34.2 hours, the fewest since January, from 34.3 hours. Average hourly earnings fell three cents.
While the report underscored the frail state of the economy, the hiring slowdown probably will not be seen as a recession signal as layoffs are not rising that much.
A strike by about 45,000 Verizon Communications workers helped push employment in the information services down by 48,000.
An acrimonious political fight over US debt, which culminated in the downgrade of the country's AAA credit rating from Standard & Poor's, and a worsening debt crisis in Europe ignited a massive stock market sell-off last month and sent business and consumer confidence tumbling.
With the unemployment rate stuck above 9% and confidence collapsing, US president Barack Obama is under pressure to come up with ways to spur job creation.
Mr Obama will lay out a new jobs plan in a speech to the nation on Thursday.
The weak employment data could strengthen the hand of officials at the US central bank who were ready at their August meeting to do more to help the sputtering economy.
The Fed cut overnight interest rates to near zero in December 2008 and it has bought $2.3 trillion in securities.
Many analysts say its arsenal is now largely depleted, although they expect it to do more to try to prop up growth.
Although hiring cooled, there is little sign companies responded to the darkening outlook by laying off workers.
First-time applications for state unemployment benefits have hovered around 400,000 for weeks.
The steady jobless claims, relatively strong consumer spending, continued demand for manufactured goods and increases in industrial production suggest the economy will steer clear of recession.
Still, analysts warn the economy is so weak, any fresh shock could send it tumbling.
In the first half of the year, the economy expanded at less than a 1% annual rate, bad news for the estimated 14m unemployed Americans.
If job growth does not accelerate, it could take more than four years to return to the pre-recession employment level.
