WASHINGTON (AFP) - The US unemployment rate leapt to a new 25-year high of 8.5 percent in March as recession-battered employers shed another 663,000 jobs, the Labor Department reported Friday. The monthly snapshot of the labor market, seen as one of the best indicators of economic momentum, showed widespread losses across major sectors of the economy as the jobless rate rose from 8.1 percent in February. Since the recession began in December 2007, a staggering 5.1 million jobs have been lost, with 3.3 million occurring in the past five months, the agency said. The report was roughly in line with forecasts from private economists, who on average had expected 658,000 job losses and an unemployment rate of 8.5pc. The jobless rate is the highest since November 1983. The weak labor market offered a clouded outlook for what some analysts say is a bottom for an economy ravaged by a housing meltdown that has hammered the banking sector and squeezed credit. Revised data showed January job losses rose to 741,000, from an earlier estimate of 655,000 lost. The loss for February remained unchanged at 651,000. The data can be considered about as expected, but are also clearly very weak, analysts at Briefing.com said. The market has been anticipating an improved economic environment, and payrolls lag demand, so the degree to which this undermines the recent optimism is uncertain. Some said the markets were bracing for a potentially worse report. We were braced for a reading of 720,000 before expecting the 'freak-out button to get hit, said Jon Ogg at 24/7 Wall Street. All we can hope is that the slowdown in firings starts to come into play if things in the economy start to see drops that are not as bad as the Depression-trade was indicating just a month ago. The total number of unemployed rose to 13.2 million in March, with the number of long-term unemployed jobless for 27 weeks or more rising to 3.2 million. In March, the goods-producing sector lost 305,000 jobs including 161,000 in manufacturing and 126,000 in construction. The service sector, which provides the majority of US jobs, shed 358,000 positions including 43,000 in the financial sector. The only sector to add employment was education and health care, up 8,000, while government employment fell by 5,000. The average work weak contracted to 33.2 hours from 33.3 hours, which analysts said could mean lower production and income, hurting the economy. The US economy contracted at a steep 6.3 percent pace in the fourth quarter as the recession deepened. The government will estimate first quarter output later this month. Meanwhile,declines accelerated in the massive US services sector, which contracted for the sixth consecutive month in March, a private research firm reported Friday. The Institute for Supply Management said its nonmanufacturing index stood at a seasonally adjusted 40.8 percent in March, 0.8 percentage point lower than the 41.6 percent registered in February. The ISM index sets 50 percent as the barrier between growth and contraction. The March reading surprised the consensus analysts forecast of an improvement to 42.0 percent in the sector that dominates the worlds largest economy. The business activity index showed some pickup, with a rise to 44.1 percent from 40.2 percent in February. However, the new orders index deteriorated to 38.8 percent from 40.7 percent the preceding month, and the employment index plunged five percentage points, to 32.3 percent.