US jobs growth slowed sharply last month, bringing to a halt the recent improvement in the economy's labour market.
America created 88,000 jobs in March, according to a report from the Bureau of Labor. That is less than half the 190,000 that economists had forecast.
The FTSE 100 fell 1.9pc after the weaker-than-expected number and the Dow Jones Industrial Average opened down 1.1pc - or 168 points - at 14,437. Bourses in German and France dropped more than 2pc and the dollar slid 0.2pc against a basket of currencies to 82.496.
"The report will fuel concerns about another spring swoon for the economy, the adverse impact of Congressional dysfunction and, more generally, the weak underlying dynamism of the economy," said Mohamed El-Erian, co-chief investment officer at Pimco.
The number will raise fears that $85bn in government spending cuts that began last month will provide a fresh headwind for an economy that almost stalled in the fourth quarter. The easing in the pace of job growth also echoes a pattern from last year, when buoyant job creation at the start of the year quickly tapered off.
Economists have been hopeful that an improving jobs market will be enough to shield consumer confidence from the effect of government spending cuts that began in March.
This year will see about $85bn in cuts across government departments and are the first installment in about $1.2 trillion in reductions planned for the next decade.
Despite the weaker-than-forecast figure, there was encouragement to be taken from the report from the Bureau of Labor. The number of jobs created in both January and February was revised up by 66,000.
There is also increasing confidence that the labour market will benefit from the tailwinds that the recovery in the housing market will provide. The latest reports on prices and sales have shown an increase in each, raising expectations that prices will climb further this year. Bank of America (Other OTC: BACYL - news) , for example, forecasts prices will climb 8pc this year.
The report also showed that the unemployment rate dropped to 7.6pc in March from 7.7pc in February. However, economists put the decline down to a drop in the participation rate, which fell to 63.3pc last month from 63.5pc in February.
"The only good news in this report is that average weekly hours worked edged up to 34.6, from 34.5, and employers added 20,000 temporary workers. Otherwise, the 24,000 decline in retail employment suggests that consumers are finally pulling back," said Paul Ashworth, chief US economist at Capital Economics.
"After a very rapid start to the year, economic growth and employment gains have slowed quite sharply in March, repeating what we've seen in the past couple of years. We don't anticipate the slowdown becoming too severe, not when the housing recovery is firing on all cylinders, but it is a reminder that the US is still unable to sustain what used to be just average rates of growth."
Some economists warned against reading too much into the jobs figures.
"We don't think there is enough signal here to conclude the US economy is wobbling. Rather, it appears that the underlying trend has not improved as much as the January-February data suggested," said Julia Coronado, chief North America economist at BNP Paribas (Milan: BNP.MI - news) in New York.