US employers sacked far more workers than expected in June, pushing the country's unemployment rate to a 26-year high of 9.5 per cent.

The Labor Department's release of non-farm payrolls showed that 467,000 people lost their jobs last month, far more than the 363,000 cuts predicted by economists. The Dow Jones industrial average tumbled by 2.63 per cent or 223.32 points to 8,280.74 after investors took fright at the data. In London the FTSE 100 index fell 2 per cent to 4,243.95.

The Dow Jones Industrial Index slumped on the news, down 175.26 points of 2.06 per cent to 8,328.8 at 1pm in New York. This in turn pushed the FTSE 100 down more than 2 per cent to close down 106.4 points at 4234.3.

But the rise in unemployment was not as bad as the 9.6 per cent rate economists had expected. The rate is calculated by surveying householders rather than companies.

Although the rate of job losses has slowed since January when 741,000 roles were cut, America's unemployment rate is expected to hit 10 per cent within months.

The Labor Department revised its job loss figures for June, cutting them from 345,000 to 322,000 but increased the numbers for April from 504,000 to 519,000.

About 6.5 million jobs have disappeared in the US since the country's recession started in December 2007.

Last month, the manufacturing sector accounted for the largest number of cuts, with 136,000 people newly unemployed.

Orders to US factories, however, rose 1.2 per cent in May, ahead of the 0.8 per cent increase economists expected.

May's rise was the biggest improvement since last June, when orders went up 2.1 per cent. Orders were down every month between last August and January and recent months' rises fuelled hope that the manufacturing sector was recovering.

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