Fears of US recesson after increase in jobless

US unemployment rose to its highest level for two and a half years in April, prompting fears the country is plunging into recession.

The unemployment rate rose to 4.5% as businesses cut 223,000 jobs during the month.

Manufacturing employment accounted for nearly half of the decline, dropping 104,000.

The dollar weakened after the release of the larger-than-expected increase.

Steve Hannah, chief economist at National Australia Bank, says the figures were a shock to the market and certainly to the general public in the US.

He says the figure is consistent with a full-scale recession.

Mr Hannah adds:"The spectre of recession comes back into the fore and gives a rather negative message to the dollar."

"I think the market will begin to question and speculate that this is the big turning point in the dollar."

He however cautioned on the next week's return of Japanese investors after the Golden week holiday.

He says: "It may be that we see a pick up in dollar assets by Japanese next week."

The dollar weakened to 0.8988 against the euro from 0.8935 prior to the release of the US data, and eased to 120.83 against the yen from 121.43 previously.