The US jobless rate leapt to a four-year high of 4.9% in August, government figures showed today, dampening hopes of an imminent recovery in the sluggish economy.
The jobless rate, which was up from 4.5% in the previous month, shot well above the Wall Street forecast of 4.6% and was the highest figure since September 1997.
Despite the poor unemployment figures Alan McQuaid, economist at Bloxham Stockbrokers, remained upbeat about the prospect of an improvement in the US economy's fortunes. He said the stronger purchasing managers data on Tuesday indicated the manufacturing sector may be turning the corner.
The US economy dumped 113,000 non-farm payroll jobs in the August, the Labour Department reported.
Most of the losses were in the hard-hit manufacturing sector, where job numbers slumped by 141,000 - the biggest fall since July 1998 and a sharp blow to emerging hopes of a recovery.
The news prompted immediate speculation of a further rate cut by the Federal Reserve, which has already slashed the federal funds rate by three percentage points this year to 3.5%.
On the foreign exchange markets, the euro surged against a wounded dollar, climbing to 90.21 US cents minutes after the figure was released from 89.90 just before. Hourly earnings rose 0.3% in August, in line with Wall Street expectations.
For the services linked to the manufacturing sector, payrolls rose by only 23,000 in August while the number of jobs in services in general rose by 72,000. Retail jobs fell 26,000 in the month.
The service sector has averaged only 10,000 new jobs per month over the past five months, after averaging 93,000 per month last year and 131,000 per month in 1999. Year-on-year, hourly earnings were up 4.2%.
In July, manufacturing jobs fell a revised 71,000, down from an initial estimate that job numbers in the sector fell by 113,000.
