The US plunged headlong towards recession tonight as figures showed American companies cut 80,000 jobs last month - the biggest total for five years.

The Labor Department said the number of jobs outside the volatile agricultural sector - or "non-farm payroll" figures, as they are known - plummeted by more than expected in March. It also revised its already weak figure of 63,000 job losses in February to 76,000.

The dollar fell as traders bet the US Federal Reserve will slash rates in the coming months in a desperate bid to revive the ailing economy.

Economists said the grim figures were a sure sign that the world's largest economy was already in recession. US employers have cut 232,000 jobs in the past three months.

Carl Lantz of Credit Suisse said: "There doesn't appear to be any silver lining. It shows that we're right in the middle of a recession that will probably take a while."

Paul Ainsworth of Capital Economics said: "Conditions are already bad in the labour market but they are going to get a lot worse over the next few months."

The Fed, led by Ben Bernanke, has reduced interest rates from 5.25% to just 2.25% in recent months and is widely expected to make further aggressive moves soon.

Rob Carnell of ING said: "All of this adds confirmation to Ben Bernanke's recent assessment of the US economy as likely to flirt with recession in the first two quarters of this year - though on a realistic assessment of all the data, it is hard to argue that the US is not now already in one.

"Further, probably substantial rate cuts remain very likely in this environment and we expect the Fed funds rate to decline to a trough of only 1% by June."