US job data adds to economy gloom

The service sector makes up two thirds of US economic activity.

Worse than expected employment figures sent US shares lower in early Thursday trading as concerns about the state of the US job market.

A Labor department report suggested that the number of unemployment benefit claims last week hit their highest level since September 2005.

It added to fears that the monthly jobs report, out on Friday, would be gloomy.

Separate data suggested that the US service sector was still shrinking, though less sharply than thought.

Figures from the Institute of Supply Management (ISM) said the sector had contracted for the third consecutive month in March.

The ISM's index of service sector activity hit 49.6 last month, up from 49.3 in February. A figure of less than 50 indicates contraction. Analysts had forecast a reading of 49.0.

Services account for two-thirds of economic activity in the US.

"In general, we expect negative headlines on the economy, so the ISM number is surprising," said Solaris Asset Management chief investment officer Tim Ghriskey.

"But the negative sentiment is pretty thick in the market."