NEW YORK: The US unemployment rate dropped last month for the first time since April 2008, a surprise fall greeted by the White House as evidence that the world's largest economy has been pulled back from the brink of depression.

Although employers cut 247,000 jobs in July, by a statistical quirk the size of the labour force fell faster than employment, so the monthly rate of unemployment fell to 9.4 per cent from June's figure of 9.5 per cent.

The figures were far better than economists anticipated and they sent stockmarkets surging in London and New York. The FTSE 100 index climbed 46 points to 4,737 while on Wall Street the Dow Jones Industrial Average gained more than 140 points during early trading. The dollar rose against the euro and the yen.

The number of job losses was the lowest monthly figure since August last year, aided by new activity in Detroit's troubled motor manufacturing industry. The labour force fell because certain job-seekers, including college students, gave up looking for work.

President Obama's press secretary Robert Gibbs said the White House still expected unemployment to climb to 10 per cent before the economic downturn ends. He said news that the number of job losses was falling was "more evidence that we pulled back from the edge and away from the brink of a depression".

But he added, "None of us loses sight, though, that last month, a quarter of a million people lost their jobs." Job losses slowed markedly in most sectors last month, except retail and transport. Manufacturing employment fell by 52,000. This was boosted by the reopening of assembly plants at troubled carmakers General Motors and Chrysler, which emerged from bankruptcy.

Experts emphasised that unemployment may not have peaked and could rise further later in the year. But Nigel Gault, chief US economist at IHS Global Insight, said: "We are now getting back on track. The economy is still shedding jobs, but the pace of decline is slowing, consistent with the view that output has hit bottom and growth is now resuming." HSBC's head of US economics, Ian Morris, said he expected to raise his forecast of a 2.75 per cent increase in US gross domestic product during the second half of the year. He said the government's "cash for clunkers" scheme would give a lift to jobs in both in vehicle manufacturing and services sector.