NEW YORK - US STOCKS skidded on Friday after a dire labor report showing the worst annual job losses since World War II raised alarms that the deepening recession's worst was yet to come.

The Dow Jones Industrial Average tumbled 144.72 points (1.66 per cent) to 8,597.74 at the closing bell and the tech-heavy Nasdaq shed 45.42 points (2.81 per cent) to 1,571.59.

The Standard & Poor's 500 index retreated 19.57 points (2.15 per cent) to 890.16, according to preliminary closing figures.

Investors turned gloomy after sifting through the blockbuster Labor Department report released before the market open.

The US economy shed a massive 524,000 jobs in December, in line with market expectations, driving the unemployment rate to a 16-year high of 7.2 per cent.

The weak December figures capped a year of the worst job losses since 1945, the department said. The economy shed 2.6 million jobs in 2008, with the bulk of them, 1.9 million, in the last four months of the year.

Some economists said the job losses were not as brutal as expected after an ADP report on Wednesday showed the private sector lost a shocking 693,000 jobs in December, far bigger than the 493,000 expected.

'There is no doubt that these are very weak numbers and that the economy has downward momentum,' said Briefing.com analysts. 'This was ... not as bad as some of the fears expressed by traders.'

For 24/7 Wall St. analyst Jon Ogg, the numbers did not change projections of 'atrocious' data for January as companies accelerate layoffs. -- AFP