American markets tumbled on Friday as economic data stoked fears that the economy is heading for a recession.

Stocks across the board dropped sharply after the Labor Department said employers cut a net 4,000 jobs in August, down from a 68,000 increase in July and dramatically lower than the 110,000 improvement economists had expected. It was the first time in four years the number of Americans with jobs fell. It now appears likely that the Federal Reserve will be forced to cut interest rates.

On Friday the major indices fell by about 2 per cent with the Dow Jones Industrials plummeting 250 to 13,113; the S&P500 dropped 25 points ending at 1,454, and the Nasdaq lost 49 to finish at 2,566.