Jobs gloom increases likelihood of US rate cut

The chances of another US rate cut rose sharply yesterday after government figures showed firms laying off workers at the fastest pace for nearly a year.

More than 101,000 jobs were lost last month, the largest fall in employment since last February, according to figures published by the US labour department.

Analysts who had been expecting payrolls to rise, blamed a dismal holiday trading season which prompted a spree of job cuts by retailers.

Paul Ashworth, international economist at Capital Economics said the figures were "simply awful".

"The US economy appears still to be well entrenched in its 'soft patch'. If this continues, then the Fed may need to step in and cut rates," he said.

Yesterday's report contains worrying news for the Bank of England which is relying on a bounce-back in the US economy to boost growth this year in Britain.

It caps a gloomy year for jobseekers, who saw the unemployment rate surge from 5.6% in January to close the year at 6%, the highest for eight years. The number of people unemployed for 15 weeks or more climbed to 3.2m in December. President Bush revealed a $3.6bn programme to help America's new jobless, which will offer up to $3,000 (£2,000) in "re-employment accounts" towards expenses such as child care, job training, transportation and moving home.