US employers announced 85,396 job cuts in March, down 38 percent from February, said a report by outplacement firm Challenger, Gray and Christmas Inc.

It was the lowest level of job cut announcements in six months.

"March marked the culmination of the war build-up, and it clearly caused American businesses to put major decisions and actions on hold. One result: job cuts fell to their lowest level since September, 2002," said the firm's chief executive, John Challenger.

"Corporate America is stuck in limbo. The one thing we do not expect is significant job creation," he said.

The number of job cuts in March was down 17 percent when compared with March 2002.

By sector, transportation cut the most jobs in March, announcing 19,397 reductions as airlines weathered a crisis. Electronics came second with 17,051 cuts and the government sector third with 11,493 cuts.

Official unemployment figures for March are scheduled for release on Friday.

Meanwhile, the first signs of the impact of the Iraq combat on the US high street revealed weakness.

Consumers, glued to television for the opening shots of the Iraq war, sent sales into a 1.4-percent slump at US retail chain stores in the week ending March 29, according to a barometer drawn up by Bank of Tokyo-Mitsubishi and UBS Warburg.

It was the steepest fall since December last year.

"The 'CNN effect', which is the tendency for potential shoppers to stay home and watch the war coverage on television, was seemingly instrumental in restraining sales," the survey said.

The Iraq war appeared to have a bigger initial impact on chain store sales than in the comparable period of the Gulf War, it said.

Sales were generally below expectations, the survey said.

Some reports also suggested that stores near US borders suffered as fewer people crossed into the United States to shop.

Sales at chain stores in March were expected to be between flat and down 1.0 percent, partly because of the later arrival of Easter, which lands April 20 this year compared to March 31 last year.

Consumer spending accounts for two-thirds of US economic activity.

"The war effect on monthly sales is likely to depress sales as well, but only modestly -- most likely no more than 0.5 percentage points -- since we believe much of that effect already has been depressing sales," it said.

Government figures last week showed consumer spending, when adjusted for inflation, fell 0.4 percent in February, the steepest fall since September

Fears of an Iraq war, combined with snowstorms and mass job cuts also sent February retail sales sliding 1.6 percent, the steepest dive since the aftermath of the September 11 attacks, government figures showed.

The key US surveys in the past month have shown US consumer confidence at or close to 10-year lows.

SPACE.WIRE