US unemployment remained steady at 4.5% during July, according to the US Department of Labor.

Over the month a total of 42,000 non-farm jobs were lost from the US economy.

The manufacturing sector suffered the worst amount of cuts, losing another 49,000 jobs.

The services area shed 22,000 jobs, the next biggest loser in the economy. This raised fears that the downturn could be spreading to the services sector.

Overall the unemployment data was interpreted positively, however, and was seen as an indication that the US slowdown could be bottoming out.

But financial markets seemed unimpressed, fearing that the figures could prompt the US Federal Reserve to alter its aggressive policy of repeatedly cutting interest rates.

Better than expected

Most analysts on Wall Street had been predicting that unemployment would rise to 4.6% and that the economy would lose 50,000 jobs.

Dana Johnson, senior managing director at Banc One Capital Markets in Chicago, said: "The report builds the case a bit that the rate of deterioration in the economy is slowing.

"The economy is weak, but it's weakening a little less quickly."

David Orr, the chief economist at First Union Corp, added that the data "dispels the worst case scenario leading to a half-point [interest] rate cut" in August.

In June, the US lost 93,000 jobs, which is a revised figure compared with an initial estimate of 114,000 jobs.

The report from the Labor Department also said that hourly earnings rose by 0.3% during in July and were up 4.4% on the year.

Markets disappointed

The unemployment figure was keenly anticipated by financial markets.

But although the news was welcomed by those who had feared an economic slump, US shares opened slightly lower.

The technology-heavy Nasdaq Composite Index was down 0.68% in early trading, while the blue-chip Dow Jones Industrial Average opened just under 0.1% lower.

The disappointment was attributed to fears that the Fed might be less likely to cut interest rates at its next meeting.

At the same time, the dollar traded near 88.5 cents against the euro, its lowest level since 17 May.