US unemployment rate hits 26 year high

America's unemployment rate hit a 26 year high of 9.7 per cent after companies cut 216,000 jobs in August.

The Labor Department also revised job losses for June and July, increasing by 49,000 the number of jobs lost in those months.

The job cuts in August were not as severe as the 225,000 cuts expected by economists. In fact, it was the lowest number of monthly job cuts in a year. 

The Dow Jones industrial average rose 29.32 points to 9,373.93 while in London the FTSE 100 index added 64.91 points to 4,861.67.

But, the unemployment rate, which dipped to 9.4 per cent in July, ratcheted up because 73,000 workers who had previously given up looking for jobs started hunting for employment again, increasing the potential labour force.

US unemployment is expected to hit 10 per cent by the end of the year. The country has lost about 6.9 million jobs since the recession started in December 2007 and there are now 14.9 million unemployed Americans.

However, the August report confirmed the pace of cuts was easing from early this year, when nearly three quarters of a million jobs were lost in January.

The Federal Reserve warned on Wednesday that the job market was still "poor" and companies would remain cautious about putting on workers despite increasing signs of an economic recovery. 

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