More than 500,000 Americans lost their jobs last week, representing the fastest rise in US unemployment since the terrorist attacks of 2001.

Around 6.5 per cent of the American workforce are without a job and today's new jobless claims data is likely to help propel that rate above 7 per cent by the New Year.

According to official statistics published by Washington's Labour Department today, 516,000 Americans filed new claims for unemployment benefit last week, 32,000 more than the week before, and well above Wall Street expectations of 480,000.

The numbers, which one Wall Street economist described as "awful" are the lastest sign that America has been taken by surprise at the astonishing speed that the US recession is spreading across the country.

This week, Circuit City, America's second biggest electronics retailer, filed for Chapter 11 bankruptcy protection, said it would have sacked a fifth of its workforce by the end of the year and admitted that its management had been "upended" by the speed of the recession.

Last night, Intel wiped $1 billion off its profit forecast for the fourth quarter of the year following a sharp and rapid slowdown in demand for its microchips.

However, Wall Street staged a stunning rebound, sending the Dow Jones industrials up 552 points or 6.67 per cent to 8,835, after driving it near its lows for the year. Following three days of selling that wiped out about $1 trillion in shareholder value, many investors, though nervous about the economy, appeared to believe the market had priced in enough bad news. Analysts also said investors were positioning themselves ahead of a meeting of Group of 20 leaders in Washington.The meeting could possibly bring some decisions about mending the troubled global financial system. The Dow briefly dropped more than 300 points below 8,000 – close to lows that it hit October 10 - before a sharp climb into positive territory.

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