"I don't think we can hold out the prospect that unemployment would stabilise at the current level," Lawrence Summers, the head of the National Economic Council which advises Barack Obama, the US president, said in Washington DC.

"Unemployment lags a little bit what happens to real economic activity."

Stocks rally

The US commerce department said the country's trade deficit shrank by 28.3 per cent in February to $26bn, its lowest level since November 1999, driven fall in imports in the US and an unexpected rebound in exports.

Economists, who had expected the deficit to widen slightly in February, said the figure, combined with the job data, could indicate that the US economy's downward spiral may be easing.

US stocks rallied following the news, with the Dow Jones Industrial Average breaking the 8,000 point marker by two per cent to hit 8000.62 points in mid-morning trading.

Wall Street was also buoyed by better than expected projected quarterly profits for the first financial quarter from US bank Wells Fargo, who said it made $3bn.

The news fuelled market hopes that stabilisation might be returning to the fragile banking sector.