President Bush is watching jobs data closely

According to Labor Department figures, a paltry 21,000 jobs were added in February, well below analyst estimates.

Many observers had expected February to provide final proof that companies were optimistic about the outlook for growth and had started hiring again.

The concern is that job worries will stop consumers spending.

The news caused the euro to jump above $1.24, as traders rushed to sell the dollar. Sterling gained 1.3% to stand at $1.84.

On Wall Street, the Dow Jones share index fell sharply when trading began before recovering to close up 7.5 points at 10,595.5.

Too slow

The US economy has recorded jobs growth for the past six months, but at a very sluggish rate.

Economists estimate that 150,000 jobs need to be created each month to keep up with the growth in the US labour force.

This is a terribly disappointing report Joel Naroff, Naroff Economic Advisors

Analysts had been expecting about 125,000 jobs to have been added during February.

The weaker-than-expected figures now appear to have ruled out any rise in US interest rates in the short term.

"The Fed isn't going to change monetary policy till they've seen several months of substantial jobs growth," said David Resler, chief economist at Nomura Securities.

"This delays that reckoning a bit more. I don't see them moving before December or January."

Spending

There was further bad news on the employment front, with the number of job gains in January being revised down from 112,000 to 97,000, and December's growth figure dropping to 8,000 from 16,000.

The US unemployment rate remained unchanged at 5.6%.

"This is a terribly disappointing report," said Joel Naroff of Naroff Economic Advisors.

"The economy clearly needs to see better job growth to support consumer spending."

The persistently weak jobs figures could raise the pressure on President George W Bush ahead of the presidential election later this year.

US Treasury Secretary John Snow said the weakness of the figures made it all the more important to retain the tax cuts that President Bush has introduced.