More Americans drew unemployment benefit this month than at any time since December 2003 as Wall Street interpreted the official numbers as evidence that a US recession is well underway.

While the Labor Department statistics showed that fewer people who were already unemployed managed to find jobs, the figures also indicated that 372,000 new individuals joined the benefit queue just last week.

Ian Shepherdson, the chief US economist at High Frequency Economics, said: "This level is now slightly higher than was recorded in the first month of the recession in March 01. We can think of no good reason why claims should now level off, and plenty of reasons why they should be expected to rise further. Expect 400,000-plus by mid-year."

About 5.1 per cent of the US population who would be available for work are currently unemployed — a rate that is expected to continue to rise to 6 per cent by Christmas. Such an unemployment rate — which lags the direction of the overall economy — would be widely perceived as evidence that the US was either in the midst, or on the way out, of a serious recession.

Jobless numbers have been rising sharply since December as the US began to absorb the impact of widespread redundancies in the financial services sector, that has been laying off workers to cope with the credit crisis that erupted last summer.

The labour data is expected to apply further pressure on the US Federal Reserve, who are scheduled to meet at the end of this month, to cut interest rates by a quarter percentage point to 2 per cent.

Kevin Logan, senior economist at Dresdner Kleinwort, the investment bank in New York, expects this month's rate cut to be the last.

He said: "I think the Fed will stop at 2 per cent. They are concerned about the longer run and inflationary pressures that low interest rates stoke. Also, interest rates work with a lag — you can't expect immediate gratification. In addition, I sense that they are passing the baton on to fiscal policy — Washington is sending tax rebate cheques out in May and that will have some upward effect. They will be nervous of over-doing it."

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