The dreadful state of the American economy was laid bare for Barack Obama today as official figures showed unemployment has rocketed to its highest for 14 years.

US employers fired 240,000 workers last month, against expectations of 200,000. At 6.5%, the unemployment rate in the US is now at its worst since 1994. The rate in the UK is 5.7%.

"We're heading for a deep recession. Banish the word mild from your vocabulary. It's big, it's bad and its broad-based," said Nariman Behravesh, chief economist at IHS Global Insight in Massachusetts.

Analysts said the bad unemployment numbers "only reinforced" market talk that the unemployment rate would keep increasing to 8%.

"We have entered the phase of serious recession conditions," said Richard DeKaser, chief economist at National City Corp in Cleveland, Ohio.

Despite the grim figures, shares on Wall Street jumped today as analysts said it was now more likely than ever that the central bank, the Federal Reserve, would cut interest rates again soon.

Traders said bargain-hunters were moving in on shares on both sides of the Atlantic following the big sell-offs seen last night and earlier in the week.

"This will revive the possibility that the Fed might take action, not only on the interest rate front, but on other fronts," said Stanley Nabi, vice chairman of Silvercrest Asset Management in New York.