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The US economy has been faring better than thought, according to figures on productivity and the service sector.

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The US service sector grew in August, beating expectations, according to the Institute for Supply Management (ISM).

The ISM's non-manufacturing index registered 50.6 in August from 49.5 in July. A figure above 50 denotes growth.

Meanwhile separate data showed productivity better than forecast in the second quarter, while labour costs declined, official data showed.

The figures suggest the world's largest economy is in better shape than had previously been thought.

Productivity - the amount of output for every hour worked - climbed to an annual rate of 4.3% in the three months to June, the Commerce Department said.

In the first three months of the year, productivity rose 2.6%.

Simultaneously, labour costs dropped to 0.5% on a yearly basis, reversing the rise seen in the three months to March when they were 1.2% higher.

For employers, if labour costs rise quicker than productivity, it can contribute to quickening inflation.

The productivity data was viewed positively by analysts, who argue it helps keep a check on inflation at a time when firms are facing a sharp rise in costs.

Economic uncertainty

The latest figures reinforce the view held by some analysts that the US might have seen the worse of the downturn, while Europe is still being squeezed.

In August, figures showed the world's largest economy expanded at a revised rate of 3.3% annually during the second quarter of 2008, much higher than its first estimate of 1.9%.

But there is still much uncertainty surrounding the outlook for the US economy.

Only a day earlier, on Wednesday, the US central bank said the economy faced slow growth and higher prices.

The Federal Reserve's so called Beige Book report said economic activity was "weak, soft or subdued" in the US, as consumers tightened their belts.

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An alleged Colombian drugs lord, Edgar Guillermo Vallejo-Guarin, has been arrested in Spain.

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Mr Vallejo-Guarin, known as Beto the Gypsy, is wanted for drugs-trafficking, money-laundering and murder.

Spanish police say he was using a false identity when they arrested him at a luxury hotel in the capital, Madrid.

The US authorities say he is one of Latin America's top drugs traffickers and had offered a $5m reward for information leading to his arrest.

False documents

The BBC's Danny Wood, in Madrid, says Beto the Gypsy, 47, is suspected of transporting tonnes of drugs into the US and Europe.

The US Drugs Enforcement Agency says he was one of the main sources of Colombian cocaine smuggled into America in the 1990s.

He has been a fugitive since 2001, when he was indicted by a court in Florida.

Police said he had been constantly on the move to avoid arrest, staying in hotels across Europe, and was carrying false documents when he was arrested.

Spain is one of the main entry points to Europe for cocaine smuggled from South America.

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Fears about a global economic slowdown, heightened by worsening US job figures, have continued to undermine stock markets around the world.

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London's FTSE 100 index lost 2.3% - taking its weekly decline to 7% - its biggest since July 2002.

Markets in Paris and Frankfurt fell by 2.5% as economy concerns spread.

On Wall Street the Dow Jones index clawed back early losses to edge higher despite figures showing the US economy shed 84,000 jobs last month.

But the benchmark US index still had its worst week since May.

Earlier, Japan's main share index fell nearly 3% while markets in Hong Kong, China, Australia and India all slid 2%.

'Ugly' data

The US labour market figures - which showed the unemployment rate rising to 6.1% - were a further jolt to investors who have had to swallow a slew of poor economic data in recent days.

Economists had been expecting 75,000 jobs to be lost while the government also revised upwards.

"This was an ugly number that pretty much confirms that our economy continues to trend downward," said Jack Ablin, chief investment officer of Harris Private Bank.

"This just knocks the legs out of any hope of seeing much economic improvement right now."

'Uncertainty'

The FTSE 100 closed down 2.3% at 5,240.70 points. The last time it lost so much value in a week was more than six years ago in the wake of financial scandals such as Enron and WorldCom.

Markets in Paris and Frankfurt continued their recent downward trend, both the Cac-40 index and the Dax-30 dropping about 2.5%.

The Dow Jones index, which lost 3% on Thursday, rose 32.73 points, or 0.3% to 11,220.96, but still ended down 2.8% on the week.

"Given the fact we were down so much yesterday we're seeing a bit of a reflex rally with investors wanting to take advantages of some of the bargains," said Bucky Hellwig, senior vice president at Morgan Asset Management.

The Nasdaq index slipped 3.16 points, or 0.1% to 2,255.88, ending the week 4.7% lower.

Earlier Japan's benchmark Nikkei index fell 361.54 points to 12,196.12 amid a widespread sell-off of shares in Asia.

The Hang Seng index fell more than 3% in Hong Kong while markets also fell sharply in China, Australia and India.

"Amid the uncertainty, few investors are willing to buy," said Masayuki, Otani, chief market analyst at Securities Japan.

"Several bad things happened at once," he added, explaining the fall.

Gloom

Worries about inflation have prevented central banks in Europe from cutting interest rates to help forestall a slowdown.

But analysts believe this could change soon with economic forecasts across Europe looking increasingly gloomy.

The European Central Bank cut its 2009 growth forecast from 1.5% to 1.2% on Thursday while the UK economy stalled in the second quarter.

In a separate development, the Russian rouble fell against the dollar a day after Russia's central bank intervened to support the currency amid concerns about a flight of foreign capital after the conflict with Georgia.

The central bank sold up to $4bn in reserves, the Financial Times reported, after the rouble slipped to its lowest level since February 2007.

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A Swedish woman may have been locked up in a small cabin for nine years by her partner, Swedish newspaper reports say.

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The woman, 68, who is seriously ill and weighs less than 40kg, has been taken to hospital, media reports say.

Her partner has been arrested and charged with offences relating to her imprisonment. He denies the charges.

Police declined to comment further until after a court hearing in Eksjo, in the southern region of Smaland, later on Friday.

The reports appeared in the Smalands-Tidningen newspaper and the national daily Svenska Dagbladet.

Although police have not revealed details, a request for a public defence lawyer contained information suggesting the woman could have been confined for nine years, Smalands-Tidningen reported.

It said the man - also in his 60s - had initially been investigated for allegedly abusing his partner.

Police spoke to witnesses and then brought the man in for questioning.

The alleged offences are said to have occurred near Eksjo.

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The United States government says it does not see an immediate need for new measures to stimulate the US economy despite a sharp rise in unemployment.

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The latest figures show a rate of 6.1% - the highest since December 2003.

A White House spokeswoman said that while the figures were disappointing, the existing economic stimulus plan was having the impact intended.

A call for more action had been made by the Democratic Party presidential candidate, Barack Obama.

A higher-than-expected 84,000 jobs were lost last month, which together with the unemployment rate has added to concern about the US economy and its ability to stave off a recession.

In a further blow, the Labor Department revised upwards job loss figures for each of the past two months.

The Federal Reserve said earlier that economic activity remained "weak".

A separate report by the Mortgage Bankers Association said that almost one in 10 US homeowners were behind with their mortgage payments or was in foreclosure procedures.

The 9.2% default rate between April and June was up from 8.8% in the previous quarter, and nearly double the rate one year ago.

'Convincing evidence'

The number of jobs lost last month was significantly higher than the 75,000 forecast by economists.

All sectors of the economy were affected with manufacturing worst hit, shedding 61,000 jobs.

The labour market has worsened noticeably in recent months, reflected by the fact that it is now apparent that more jobs were lost in June and July than was previously thought.

Revised figures show that in June, 100,000 jobs were lost while in July 60,000 jobs disappeared. This was up from the 51,000 figure initially forecast for both months.

"It seems unemployment in the US really is accelerating," said the BBC's North America business correspondent, Greg Wood.

"There do not seem to be many sectors of the US economy which are hiring."

'Clearly deteriorating'

In the first eight months of 2008, 605,000 jobs have been lost.

Employers have now reduced their payrolls for eight straight months, with the dramatic downturn in the housing market and the credit crunch hurting all sectors of the economy.

"This is more convincing evidence that the economy is still in trouble," said Gary Thayer, senior economist at Wachovia Securities.

"The economy is clearly deteriorating."

Political focus

Both candidates in November's Presidential election are under pressure to come up with concrete proposals to help the growing number of people out of work and families battling against rising living costs.

Although the US economy grew a robust 3.3% in the second quarter, businesses are struggling to cope with the high cost of raw materials and energy, fragile consumer confidence and weaker export markets.

The Federal Reserve, which meets to decide on interest rates next week, has warned that the US is facing the twin threats of weak growth and rising inflation.

The bleak employment picture means the Fed is unlikely to raise rates in the foreseeable future while further cuts seem equally unlikely against a background of rising inflation.

"The jobs number is weak again but we think this probably is not the time to panic," said Steve Goldman, strategist at Weeden & Co.

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Production at the world's biggest aircraft manufacturer, Boeing, has halted in the US after 27,000 workers at the company went on strike over pay.

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Members of the Machinists Union, mainly based in Seattle, downed tools after last minute negotiations failed.

Boeing says it has offered more than $34,000 (£17,000) per employee in pay and benefits.

Analysts say the stoppage cause further delays in the delivery of the new Dreamliner aircraft.

The union says with that with Boeing's record profits and its members going without a pay rise for the last four years, the offer is not good enough.

Good faith

Union members hoisted their strike signs outside the Boeing plant in Everett, a city north of Seattle, cheering and blasting air horns at passing cars.

Striking workers were told by one union member that they would not falter on the strike.

"We will show the company that they are going to have to go back and bargain in good faith," said the unnamed man. "And we will stay out until every single member gets something in their contract", he told a cheering crowd of workers.

A Boeing spokesman, Tom Healy, said the company was open to further discussions.

"We've bargained in good faith, we've worked hard, but we've not been able to close the gap," said Mr Healy. "We've not been able to come close on an agreement."

Dreamliner delays

The Machinists Union is Boeing's biggest labour group, and the company has said it will not try to assemble aircraft during the strike.

Analysts say that the stoppage could cost Boeing at least $100m each day in lost revenues - as well as delays in delivering the Dreamliner.

Boeing hopes that its latest lightweight passenger jet - which is already two years late - will help it compete with rival manufacturer, Airbus.

Most of the striking workers are based around Seattle in Washington State.

The BBC's Rajesh Mirchandani says Boeing is so important to the local economy that the state governor has repeatedly called on both sides to find a solution to the dispute.

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The US presidential rivals, Barack Obama and John McCain have said they will appear together on the anniversary of the 11 September 2001 attacks.

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The senators said they would take part in the commemorations in New York - the site of two of the attacks.

The two candidates said they would put aside politics to honour the memory of the nearly 3,000 people who died.

Hijacked planes were crashed into New York's Twin Towers, the Pentagon in Washington and a field in Pennsylvania.

"All of us came together on 9/11 - not as Democrats or Republicans - but as Americans," the joint statement said.

"In smoke-filled corridors and on the steps of the Capitol; at blood banks and at vigils - we were united as one American family.

"On Thursday, we will put aside politics and come together to renew that unity, to honour the memory of each and every American who died, and to grieve with the families and friends who lost loved ones."

The event at Ground Zero - site of the collapsed Twin Towers of the World Trade Center - will mark the first time Mr McCain and Mr Obama have been together since they were formally nominated as presidential candidates at their parties' just-completed national conventions.

The two agreed not to run television ads critical of each other on Thursday and Mr McCain's campaign team said they would not run any ads.

With the parties' nominating conventions over, the candidates have been gearing up for the last weeks of campaigning up to the 4 November election.

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US Secretary of State Condoleezza Rice is in Morocco for the final leg of a tour of North Africa.

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After a historic trip to Libya, she made brief visits to Tunisia and Algeria, before arriving in the Moroccan capital Rabat.

Morocco has a good relationship with the US, even if many Moroccans strongly disapprove of American foreign policy.

Ms Rice's focus in her short visit is believed to be what the US calls "the war on terror".

Morocco says it has broken up more than 30 cells sending fighters to Iraq in the last five years, and the US and North African governments believe there is a growing threat from religious extremists in the region.

Local disputes

Other topics for discussion include the economic links between the US and Morocco, and North African regional co-operation, which is in a disastrous state.

Morocco is also particularly keen to bring up Western Sahara, the disputed territory the kingdom considers as its southern provinces.

Morocco wants US support for its proposal of semi-autonomy for the region, a proposal which has already been rejected by the Polisario Front, the armed movement struggling for total Independence from Morocco.

Historically Morocco has maintained a good relationship with the US, and this has not changed in recent years. The US sees the country as a stable friend in a difficult region, and a partner in the fight against Islamic extremism.

Morocco is proud of what it calls its tolerant brand of Islam, and has cracked down hard on radical elements in its society.

But Moroccans from all walks of life are fiercely opposed to the US invasion of Iraq, and the US's support for Israel.

Dr Rice will leave the region on Sunday, without visiting Mauritania, after the US strongly condemned last month's coup d'etat there. The most significant part of her trip will undoubtedly have been the historic visit to Libya, the first by an American secretary of state for more than half a century.

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