About 54,000 jobs lost, far fewer than the 100,000 expected, easing fears of a second US recession

Fears that the world’s largest economy is spiralling back into recession eased today as US unemployment data came in stronger than expected.

Global stock markets rallied in relief as the US government said employers shed almost half as many jobs as markets had been expecting last month. The picture in previous months was also brighter than first thought.

Non-farm payrolls showed a drop of 54,000 jobs in August. Economists polled by Reuters had forecast on average a decline of 100,000 jobs.

While for stock markets the data brought some respite after a slew of weak economic indicators in recent weeks, economists are still cautious about the outlook.

“Double-dip fears will dissipate on the back of this result, though we suspect that the US labour market is not out of the woods yet. Employment growth is still insufficient to stabilise the unemployment rate,” said Rob Carnell at ING Financial Markets.

The unemployment rate nudged higher to 9.6% from 9.5% in July as the size of the workforce increased.

But overall the data was more positive than expected, with July revised to show a fall of 54,000 jobs, a stronger outcome than the 131,000 drop previously reported. June was revised too.

The private sector, regarded as a key barometer of the economic outlook, added 67,000 jobs, above the 41,000 forecast.

Following the data, the FTSE 100 extended gains. It is up by more than 1% on the day at 5438, while stock market futures point to a strong rise when Wall Street opens.

The figures will come as a relief to president Barack Obama who has faced criticism that the US recovery has so far largely been a jobless one.

Still, the payrolls data marked the third monthly drop in jobs.

As in the UK, many workers in the US continue to struggle to find full-time work. The number of peeople employed part time involuntarily rose by 331,000 over the month to 8.9 million.

With the economy still not adding any jobs, many analysts expect the US Federal Reserve to step in with extra support for the recovery in the form of quantitative easing – a way of pumping electronic money into the economy.

“One swallow does not make a summer and looking behind these figures slow growth is still the order of the day. This does not change anything and does not alter our expectations of further quantitative easing in the future as the US veers back towards recession,” said Jeremy Cook, chief economist at World First.