The U.S. unemployment rate surged in August to a worse-than-expected 4.9 percent, its highest level in nearly four years, the government said on Friday.

The startlingly bleak report sent the Dow Jones industrials crashing to their worst levels since spring, prompting President Bush to express his concern about the economic slowdown and urge Congress to enact his "pro-growth agenda."

The jobless rate climbed to 4.9 percent from 4.5 percent in July as companies dropped 113,000 workers from their payrolls, the Labor Department said.

The report was far weaker than private economists had expected and is likely to bolster expectations of further interest rate cuts by the Federal Reserve. U.S. economists in a Reuters survey had expected the unemployment rate to edge up to only 4.6 percent.

The 4.9 percent unemployment rate is the highest since September 1997. While still low by historical standards, it marks a sharp deterioration from the three-decade low of 3.9 percent reached in several months last year.

Bush: Slowdown Is 'Real'

"The slowdown is real and is affecting too many lives," Bush said outside the Oval Office Friday. "I want the American people to know we're deeply concerned about the unemployment rates and we intend to do something about it."

Bush appeared with Vice President Dick Cheney, House of Representatives Speaker Dennis Hastert and Senate Republican Leader Trent Lott.

The president said Congress should give him fast-track authority to negotiate trade deals with foreign nations to boost export-related jobs and energy legislation to create more employment in that sector. Both issues are subjects of major debate in Congress.

Bush also said he wanted a federal budget that does not dip into the surplus Social Security revenues.

"It's absolutely essential that we work together to put a growth plan in place to create jobs for hard-working Americans. It starts with having a responsible budget that meets our nation's obligations without affecting Social Security or dipping into Social Security," Bush said.

Dawn of a New Recovery?

Meanwhile, some economists also said the report still was not devastating news because they expect the rate to rise to above 5 percent before recovery filters to the labor market.

"The unemployment rate is always at its highest at the dawn of new recoveries," said Ken Mayland, president of ClearView Economics. "It's always darkest before the dawn — that's one metaphor that is particularly relevant here."

Recession fears were renewed last week when the government revised its estimate of economic growth in the April-June quarter to a scant 0.2 percent rate. By one traditional measure, a recession occurs when the GDP turns negative for two consecutive quarters.

Just this week, Motorola Inc. announced it would cut 2,000 more jobs. Insurance giant American International Group said it's cutting 1,500 jobs, and as Hewlett-Packard and Compaq merge, the companies say they will be cutting 15,000 jobs.

Economists fear that if the employment climate continues to seriously worsen, consumers — who have been keeping the economy afloat — might sharply cut back spending and tip the country into recession.

Manufacturing was once again hardest hit, and the August decline of 141,000 jobs was the largest so far this year. Virtually every major manufacturing industry lost jobs last month. Since July 2000, manufacturing employment has plummeted by 1 million.

The biggest declines in manufacturing last month were in durable goods, with a 25,000 decline, and industrial machinery and electrical equipment, with a 19,000 drop. Furniture had its largest decline this year, shedding 10,000 jobs. In nondurable goods manufacturing, decreases in apparel, chemicals and rubber and miscellaneous plastics followed gains in July.

Manufacturing's woes continued to affect employment in transportation and public utilities, which fell substantially in August by 24,000 — the fourth drop in the past five months and the largest in that period.

Service Sector Grows

On a brighter note, the service sector, which is the engine of job creation in the United States, increased employment by 72,000 as health services continued to add jobs with 32,000 last month. Hospitals accounted for about half of that increase.

Employment in temporary help firms was steady for the month. The industry has shed jobs since last September with job losses totaling 419,000.

Retail employment was down in August as restaurants and bars lost 30,000 jobs following a large increase in July. Hotel employment also continued to fall and job losses have totaled 42,000 since March.

Computer service experienced its first drop in jobs since the late 1980s, losing 5,000 jobs. One of the reasons the Fed has cited for cutting interest rates is its concern about slumping investment by businesses in computers and other high-tech equipment, which was the fuel of the economic boom.

Construction employment was steady in August, adding 5,000 jobs. Mining, oil and gas extraction companies added 22,000 workers so far this year. Coal mining has added 5,000 workers in the past four months, the first gains in the industry in more than a decade.

Reuters and the Associated Press contributed to this report.