WASHINGTON (Reuters) - U.S. employers cut payrolls at the steepest rate in 5-1/2 years in September, slashing an unexpectedly large 159,000 jobs as employment contracted for a ninth straight month, suggesting the economy may be in recession.

People walk down Broadway past the Wall Street subway station in New York September 15, 2008. REUTERS/Chip East

The unemployment rate was unchanged from August at 6.1 percent, the highest rate in five years, as 121,000 people left the workforce, the Labor Department reported on Friday.

September’s job losses were much more severe than predicted by Wall Street economists surveyed by Reuters, who had forecast 100,000 jobs would be cut.

The report likely will ratchet up pressure on members of the U.S. House of Representatives to vote for a $700-billion rescue package for banks and other financial firms burdened by bad mortgage-related assets, which is contributing to a spreading credit crunch.

Some analysts said the monthly employment data pointed to deepening economic woes.

“We’ve seen weaker data in history, but these look pretty decisively to be the beginning of something worse,” said Pierre Ellis, senior economist with Decision Economics Inc. in New York, adding it might make the Federal Reserve more inclined to cut interest rates despite its concern over inflation.

But David Watt, senior currency strategist with RBC Capital markets in Toronto, said it was moderately encouraging that the unemployment rate, which is compiled from a separate survey, did not shoot higher.

“I don’t think there’s any doubt that the labor market has weakened, but it’s not deteriorating quite as quickly as the headline indicated,” Watt said.

U.S. stock index futures rose on hopes Congress will approve the huge financial bailout package. U.S. government debt prices pared gains and the dollar pared losses against the euro. Federal fund futures held gains, with traders expecting a 50 basis point rate cut in October.

September’s cuts follow revised losses of 73,000 jobs in August and 67,000 in July and show the decline in employment is accelerating. Some 51,000 manufacturing jobs were lost last month on top of 56,000 cut in August, the 27th straight month in which manufacturers slashed their payrolls.

Job cuts were nearly across the board in September in every major category with the exception of government, which added 9,000 jobs.

The average work week in manufacturing industries was the lowest in three years at 40.7 hours.

Overall hours of work in all industries slipped to 33.6 a week in September from 33.7 in August -- the lowest since November 2004.

Hurricane Ike, which hit the Gulf coast, and a strike at aircraft maker Boeing Co. did not impact the data because the employees affected were on payrolls for at least part of the Labor Department’s survey period.