HOWZAT

While 6.5 per cent of the American workforce is out of a job, that number is described by economists as rising "vertically" and more than 7 per cent are expected to be jobless by the end of the year.

Jobless claims jumped by 27,000 to 542,000, far higher than Wall Street forecasts of 505,000.

Wall Street was also anxious about financial stocks. Citigroup shares tumbled another 26 per cent and JP Morgan Chase losing more than 17 per cent and Morgan Stanley falling more than 10 per cent to end the session under $10. Energy stocks dropped after crude oil settled under $50 a barrel.

Europe's markets, which closed before news of the carmaker's bailout emerged, saw losses deepen. In London, the FTSE 100 index closed down 3.26 per cent to 3,874.99 points. In Germany the DAX lost 3.08 per cent to 4,220.20 points and the CAC 40 in France plunged 3.48 per cent to 2,980.42 points.

Ian Shepherdson, chief US economist at High Frequency Economics, said: "As far as we can tell, companies have thrown in the towel since September and are now hunkering down for a deep and extended recession.

"With retail sales collapsing, industrial production plunging, export orders off a cliff and commercial property just starting what will be a very steep downturn, there is nowhere to hide."

The rate of newly unemployed has been gaining pace over the last few months as the slowdown that had engulfed a handful of industries began to spread rapidly across corporate America.

Earlier in the year, the main drivers of the unemployment rate were workers from financial services, construction and retail. Those industries had been most closely connected with America's earlier economic woes — namely, the banking crisis on Wall Street, the housing slump and the subsequent drop in spending on the high street.

However, in the past month other industries have described how they had been taken by surprise at the speed of the downturn.

Electronics companies have pulled vendor financing for fear that retailers may collapse.

Circuit City, America's second biggest electronics retailer, said that its management had been "upended" by the rate at which the US is plunging into recession, and that its electronics suppliers had withdrawn credit lines to them. As it entered bankruptcy protection this week, Circuit City said it would have sacked a fifth of its staff by the end of the year.

The bleak jobless data also applies more pressure on the US Federal Reserve to cut interest rates substantially when it next meets on December 16.

It is expected that the central bank will reduce the cost of borrowing from 1 per cent to 0.5 per cent, with some economists believing that the Fed could go to zero in the next few months.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive