The Treasury bond market lost two points within 15 minutes of the release of figures showing that employment rose by 348,000 in May, and by 163,000 in April rather than the original estimate of 2,000. Share prices tumbled, triggering the New York Stock Exchange's automatic curbs on trading.
But the Dow Jones index staged a late recovery to close up nearly 30 at 5607.11, after falling 85 points earlier. The yield on the benchmark long-term Treasury bond ended at 7.04, having risen to 7.08. Share prices and gilts in London, already ambivalent about Thursday's cut in base rates, followed suit. The FT-SE 100 index closed 53.5 points down at 3,706.8.
In the markets the initial reaction was a rush to sell, amid fears that the Federal Reserve will raise its key interest rate - possibly by a full half-point from the current level of 5.25 per cent - when its policy-making Open Market Committee next meets on 2 and 3 July.
The last three rate moves by the central bank have all been downward. But with GDP apparently growing at a solid 2.5 per cent or more, Wall Street increasingly believes that Fed chairman Alan Greenspan's main concern has switched from ensuring the five-year-old recovery does not run out of steam to guarding against a new upsurge in inflation.
Yesterday, however, Mr Clinton brushed away the fears, claiming the unemployment news showed that growth was "steady and strong" with "no evidence of inflation". If this remained the case, the President added at a hastily convened news conference, "I would think the interest rates should stay down."
In fact, despite a slight rise in average hourly wage rates this spring little evidence exists of a structural upturn in inflation, currently running at 2.5 to 3 per cent annually. Recent rises in the price index have been caused by higher energy prices after the cold winter, and by the midwestern drought's impact on some food prices.
On the other hand, there have been clear signs of an upturn in retail sales and housing.
Indeed, as the election campaign heats up, the ever-crucial issue of the economy could hardly be more favourable for the White House. Consumer confidence is strong, and at just over 8 per cent the so-called "misery index" - combining the inflation and unemployment rates - is its lowest in three decades.
Yet many in the financial markets were concerned about the inflationary implications of yesterday's figures. "They show an economy that is accelerating and strong earnings growth," said Mark Cliffe at HSBC Markets.
Robert Brusca, chief economist at Nikko Securities on Wall Street, said: "I don't think the Fed will be able to sit and watch this without doing anything."
In addition to the bigger-than-expected headline jobs number, average hourly earnings climbed from $11.72 to $11.75, taking the year-on-year increase to 3.4 per cent.
Most of the new jobs were in the service industries, especially computer services, retailing, health care and temporary employment agencies. The number of jobs in manufacturing rose by a mere 6,000, after a 4,000 decline in April.
Owing to an increase in the number of people wanting to work, the unemployment rate edged up to 5.6 per cent from 5.4 per cent.