Redundancies rise as US economy stalls

American companies shed 108,000 jobs in March as the US economy sputtered with the onset of war in Iraq, official figures showed today.

The redundancies followed a loss of 357,000 jobs in February, more than originally reported, the US labour department said. But the unemployment rate stayed at 5.8%.

Today's figures follow a string of reports and surveys indicating economic weakness in Europe and the US. Earlier in the week, a survey from the Institute of Supply Management (ISM) showed that manufacturing activity in the US in March slumped to its lowest level since the aftermath of September 11.

The string of bleak economic reports has prompted analysts to argue that the US economy, the linchpin for the global economy, could dip back into recession.

"Aside from the hopes of a sustainably lower oil price, there is little to cheer about on the economic front. Tuesday's plunge in the ISM index is consistent with a number of other indicators which suggest that the economy stands on the cusp of recession," said a spokesperson for Deutsche bank.

Concerns about the war and bleak job prospects have shaken consumer confidence and slowed household spending since the start of the year.

Companies have responded by cutting orders, production and jobs, holding back economic growth.

The loss of 465,000 jobs in two months puts more pressure on the US Federal Reserve to cut interest rates from 1.25%. But with interest rates so low, economists fear that the US central bank, which next meets on May 6, is running out of room to stimulate the economy.

Consumer confidence slumped to a nine-year low last month, hit by the weak job market and slowing income growth. The percentage of people who said jobs were hard to find rose to 32.3%, the highest since May 1994, according to the New York-based Conference Board, a private research group.

The Fed cited weak employment as a particular concern last month when it declined - in an unusual move - to characterise current risks to the economy because of the ``uncertainties" created by the war with Iraq.

In the March figures, service-producing industries, including retailers, banks and government agencies, cut 94,000 jobs, after cutting 256,000 in February. Manufacturers lost 36,000 jobs last month, the 32nd month in a row.

The US went into recession in 2001 and recovery has been sluggish, especially in the jobs market which has been even weaker than following the 1990-1991 recession - dubbed the ``jobless recovery."

Redundancies have risen in the 15 months since the beginning of 2002 compared with 211,000 jobs growth in the 14 months following the recession that ended in March 1991.