MANAMA, Sept 7 (IslamOnline & News Agencies) - Despite an improvement in the post- 9/11 U.S. economy, the Arab Monetary Fund said Saturday investments in the Arab world had dipped since the September 11 attacks in the United States.

"There is a decline in investments and in tourism because of growing fears of dealing with several Arab countries," AMF chief Jassem al-Manai told a meeting of Arab central bank governors in Manama.

Manai gave no figures on the decline in investments, saying only that "investors are scared of coming to work in the region which needs capital."

The September 11 attacks in New York and Washington have taken their toll on the drive by the Gulf states in particular to attract foreign investment, seen as crucial to diversifying their oil-dependent economies.

Manai added that "Israeli attacks on the Palestinian people" and the risk of a U.S.-led military campaign against Iraq were also "blocking development plans because of instability."

"Several economic sectors, notably tourism, transport and aviation, have been affected by the events of September 11, which brought with it a risk of recession," Bahraini Finance Minister Abdullah Hassan Seif said.

Meanwhile, the U.S. economy generated 39,000 non-farm jobs in August and the unemployment rate dipped to 5.7 percent from 5.9 percent in July, the Labor Department said.

The agency also revised its figures for the prior two months. In July, payrolls rose a revised 67,000, up from the initial estimate of a 6,000 rise while job growth in June was revised downward to a gain of 34,000 from the previous estimate of a 66,000 rise.

"The bottom line on this employment report is that it is OK - not decisively weak, yet not strong," said Dick Rippe of Prudential Securities. "It is, however, in line with an economy that is gaining at a slow, but positive pace."

Economists view the labor report as crucial to U.S. economic prospects because jobs need to be added to maintain consumer spending, which accounts for about two-thirds of U.S. gross domestic product.

Wall Street reacted positively to the report, with the Dow Jones industrials up 1.7 percent and the Nasdaq closing 3.54 percent higher.

The report, said most market watchers, was just strong enough to keep the U.S. economy out of a feared "double-dip" recession, while not weak enough to prompt a rate cut by the Federal Reserve to help stimulate growth.

"The labor market may not be totally hale and hearty, but it is far from falling apart," said Joel Naroff of Naroff Economic Advisors.

The White House seized on the report to press for further measures to help the economy including legislation dealing on terrorism insurance and pension reform.

White House spokesman Ari Fleischer said President George W. Bush "noted that in this unemployment report, private sector hiring was soft and the president therefore calls on the Congress to take immediate action to pass terrorism insurance which will create jobs for construction workers."

Naroff said U.S. confidence may be boosted by the fact that the jobless rate fell to its lowest level since March.

"Anything that will help consumer confidence should be applauded," he said. "The decline, whether or not it holds, tells us that the unemployment rate has essentially peaked."

But Naroff maintained that "the real bad news was in manufacturing, which cut another 68,000 people and the reductions were widespread."

Many uncertainties on the fate of the economy still loom in the background, said Divyang Shah, Global Strategist at IDEAglobal.com, who noted the U.S. is seeking support for an attack on Iraq as the first anniversary of the September 11 attacks on the U.S. draws closer.

President Bush "is stepping up his campaign to win domestic and international backing for a regime change in Iraq," Shah said.

"Once feedback has been received, Bush will make a substantive case against Iraq at the UN on September 12," he added.

The pound weakened against the dollar but held up well elsewhere after British manufacturing and industrial production data showed a rebound in the sector following a slump in June due to the queen's Jubilee holiday and the World Cup.

The dollar in late trade in New York was being quoted at 1.4842 Swiss francs from 1.4713 a day earlier.