Oct. 2--The FTSE tumbled back below 5,000 today as awful unemployment figures emerged from the US and the City fretted that the global economy could be heading back into recession.

America's jobless rate rose to 9.8 percent in September, the worst since June 1983.

US employers cut 263,000 jobs last month -- far worse than 180,000, the figure economists had been predicting.

The figures suggest that the decline of the world's largest economy is far from over. Fears of a so-called "double-dip" recession have been growing steadily for the last few weeks, even though some economic data has been positive.

In London, dealers reacted to the news by slashing equity prices.

Trading screens immediately turned red as the employment numbers were published.

The FTSE 100 index was down 69 points at 4978 by early afternoon.

Philip Shaw, economist at Investec Securities in London, said: "These figures will serve as a wake-up call to the market that there are still downside risks to the economic recovery. The extent of job shedding in the US has been staggering in the past year."

However, he added that unemployment traditionally continues to rise for a time after the underlying economy has started to improve.

One "crumb of comfort" in the numbers was that the private sector layoffs were not rising as quickly as in previous months.

"Many of these losses were in the public sector and could therefore be something of a one-off," he said.

Since the start of the recession in December 2007, the number of unemployed people in the US has risen by 7.6 million to 15.1 million. Analysts say companies are not hiring, preferring to await better signals that the recovery will be sustained.

Rob Carnell, an economist at ING Bank, said: "The latest jobs report for the US makes for bleak reading following two months of improvements. A 10 percent unemployment rate looks all but guaranteed next month."

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