Grim US jobless numbers have increased the risk of a self-sustaining global downturn with the US, Asia and Europe sliding together, economists say.
The US jobless rate soared to a four-year high of 4.9 percent in August from 4.5 percent in July, the government said Friday, smothering hopes of an imminent US recovery.
The figure stoked fears that job concerns could undermine confidence among US consumers, until now the bedrock of the world's biggest economy, and lead them to slow spending.
"This is yet another indicator that we are heading into a significant downturn," Economic Policy Institute economist Robert Scott said.
Japan announced the same day that its economy, stagnant for a decade, contracted by 0.8 percent in the three months to June from the previous quarter.
In Germany, the biggest economy in the EU, industrial output shrank by 1.5 percent in July. Forecasts for next year's growth in the 12-country euro zone of 2.0 to 2.5 percent are already being cut.
The coincidence of bad news raised concerns that all three engines of the world economy could enter a protracted slowdown, feeding off each others' weaknesses.
"When we get into that kind of cycle it can become self-reinforcing. It can spiral down unless sharp steps can be taken to reverse the cycle," Scott said.
Decisive action by the Group of Seven powers, who meet here this month, may be required to jolt the world back into growth, he said.
In discussions between the G7 nations -- Britain, Canada, France, Germany, Italy, Japan and the US -- Washington would likely press Europe to cut interest rates, Scott said.
"I think the United States will ask Germany, not only Germany but Europe, to sharply lower their interest rates. It is not just a European problem," Scott said.
Japan was limited in its room to maneuver, Scott said, as it had cut overnight interest rates close to zero and was still struggling to keep its own economy afloat.
Asian countries were taking the brunt of the impact from the US slowdown because of their heavy reliance on high-technology exports to the US, said Moody's Investor Service chief economist John Lonski.
"I guess you have to worry more about Asia that supplies a lot of components, electronic and computers to the United States," he said.
In August, Taiwan exports dropped 25.8 percent while South Korea's dived 28 percent, Lonski said.
"Asia is facing a recession risk because of the burst of the Internet and high tech bubble in the United States," he said.
But US Treasury Secretary Paul O'Neill, speaking before the release of the weak employment figures, called last week on Japanese policymakers to do more to help the world.
"It is time for decisive action to turn the Japanese economy around," said O'Neill, who is to visit Tokyo for three days from Tuesday to meet with economic managers.
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