US jobless rate jumps to 4.9%

The US jobless rate rose unexpectedly to 4.9% in August as a slowdown in the world's largest economy hit the labour market.

Unemployment soared to its highest level in four years as businesses slashed 113,000 jobs. The labour department reported a 0.4% increase in August, up from 4.5%, the level it had held since April.

Manufacturing again took the brunt, as 141,000 jobs were lost in the largest monthly total this year. Virtually every major manufacturing industry lost jobs last month and 1m manufacturing jobs have gone since July 2000. But gains in services helped offset manufacturing job losses.

The jump in August unemployment figures puts further pressure on the Federal Reserve to cut rates yet again when it meets in early October. The US central bank has already reduced rates seven times this year to 3.5% to avert a hard landing. While the August jobless rate is still low by historical standards, it marks a big jump from the three-decade low of 3.9%, achieved in several months last year.

Analysts had expected a smaller rise of 4.6% and now see unemployment rising above 5%. In the latest round of layoffs, Motorola, the mobile phone maker, yesterday said it would axe 2,000 jobs, some of which could be in the UK.

The Bush administration is counting on tax cuts and the Fed's aggressive rate-cutting campaign to avert a full-blown recession. Last week, the government revised its estimate of economic growth in the April-June quarter to 0.2%.