NEW YORK - WALL Street shares recovered from steep early losses and finished mostly higher on Friday as the market was able to shake off a jump in unemployment that sparked renewed fears of a US recession.

Some analysts said the market had anticipated the weak labor report and had priced this is with Thursday's hefty decline, setting the stage for investors to scoop up beaten-down shares.

The Dow Jones Industrial Average of blue chips bounced back from an early slide of nearly 150 points to rise 32.73 points (0.29 per cent) to close at 11,220.96.

The tech-heavy Nasdaq composite recouped most of its hefty losses of some 1.9 per cent, ending with a modest decline of 3.16 points (0.14 per cent) at 2,255.88.

The broad-market Standard & Poor's 500 index rose 5.48 points (0.44 per cent) to 1,242.31.

Market action came as the Labour Department said the US unemployment rate jumped to a five-year high of 6.1 per cent as 84,000 jobs were slashed in August.

The report - considered one of the best indicators of economic momentum - marked the eighth consecutive month of shrinking payrolls, and was worse than expected by private economists, sparking fresh worries about recession.

Analysts at Briefing.com said the Wall Street action showed 'an impressive turn in sentiment' despite the bleak data.

'The tone through midday had been largely pessimistic, but buyers emerged as stocks posted limited losses in the face of disappointing economic data and continued threats of a global slowdown,' the analysts said.

Still, the Dow slumped 2.8 per cent for the week, with the S&P index losing 3.16 per cent and the Nasdaq down a whopping 4.2 per cent, highlighting the grim economic outlook.

'Today's employment report signalled the death knell of hope that the US can avoid recession,' said Mr Scott Anderson, economist at Wells Fargo.

'You could almost hear the bulls on Wall Street throwing themselves on their swords over the past five trading days. The payroll report should end the debate that the economy is doing well.'

Although official data showed the US gross domestic product (GDP) grew at a robust 3.3 per cent in the second quarter, many analysts say that figure was skewed by a surge in exports and helped by spending from a massive tax rebate program.

The payrolls report 'confirms that the improvement in GDP growth to 3.3 per cent in the second quarter was just a head-fake,' said Mr Nigel Gault, economist at Global Insight.

'We expect growth to slow in the current quarter to just over 1.0 per cent and then turn negative in the fourth quarter.'

Financial stocks led the late-day rebound on Wall Street. JPMorgan Chase rallied 4.46 per cent to US$39.60 (S$56.85) and Bank of America gained 5.3 per cent to US$32.23.

Some analysts said the rebound began on a report that ailing investment bank Lehman Brothers may sell parts of its real estate and asset management units.

Lehman shares jumped 6.8 per cent to US$16.20.

Oil companies were lower on the drop in crude prices. ExxonMobil lost 0.68 per cent to US$75.62 and Chevron shed 1.23 per cent to US$80.22.

SanDisk, maker of computer memory technology, surged 31 per cent to US$17.64 dollars after confirming discussions on a possible tie-up with South Korean giant Samsung Electronics.

Bonds ended mixed. The yield on the 10-year US Treasury bond rose to 3.660 per cent from 3.643 per cent on Thursday and that on the 30-year bond eased to 4.276 per cent against 4.281 per cent. Bond yields and prices move in opposite directions.

The rebound on Wall Street ended a string of hefty declines on world stock markets.

The London FTSE 100 blue chip index slid 2.26 per cent to 5,240.70, its third fall of more than two per cent in as many days.

In Paris the CAC 40 index fell 2.49 per cent to 4,196.66, after dropping more than three per cent on Thursday.

The DAX in Frankfurt shed 2.42 per cent to close at 6,127.44. -- AFP