The surprise loss in nonfarm payrolls caught most economists off guard as many had expected employment growth to continue in January.

Economists had anticipated that the world's biggest economy would create 70,000 new jobs in January, but the Labor Department on Friday said payrolls fell for the first time since August 2003 in a report President George W Bush called "troubling."

"We should expect to see more bad news on the labor market, at least through the middle of the year, before the heavy doses of monetary and fiscal stimulus begin to kick in," said Nigel Gault, an economist at Global Insight.

The government revised December's job growth significantly higher to show 82,000 new posts were created compared with an initial estimate of 18,000 positions.

The national unemployment rate, based on a separate survey, declined slightly to 4.9 per cent last month compared with 5.0 per cent in December. Economists said this was partly because fewer people were seeking work.

"Ultimately, it means the Fed has got to keep cutting (interest) rates," said Ian Morris, a chief US economist at HSBC North America.

The monthly job survey was released after the government reported Wednesday that US economic growth slowed dramatically to a 0.6 per cent annualized crawl in the fourth quarter of 2007 from a blistering 4.9 per cent in the prior quarter. The Federal Reserve has launched an aggressive rate- cutting drive to shore up growth amid increasing worries that the economy is on the verge of a recession.

Congress is meanwhile debating an economic stimulus plan worth around 150 billion dollars amid rising political angst about the state of the economy.

A persistent housing slump is threatening to derail growth as well as triggering job losses.

A total 27,000 jobs were shed in the construction industry in January, partly as home builders cut back on new developments.

The manufacturing sector cut 28,000 jobs while professional and business services companies laid off 11,000 white-collar employees.

"There are certainly some troubling signs, serious signs that the economy is weakening and we've got to do something about it," Bush said during a visit to the Midwestern state of Missouri.

The layoffs are likely to concern the Fed as it suggests some sectors of the economy are in retrenchment despite sustained moves by the central bank since September to trim borrowing costs.

The Fed cut its key federal funds interest rate by half a percentage point to 3.00 per cent on Wednesday in a bid to underpin economic momentum, eight days after slashing borrowing costs by an historic three quarters of a percentage point.

Central bank policymakers are next scheduled to meet on March 18 although they can hold a rate meeting anytime they want.

Job losses have spread into business services as major banks, such as Citigroup and Lehman Brothers, and ailing mortgage companies have laid off workers amid the housing market downturn.

Some industries hired new employees last month, however.