More than half a million Americans lost their jobs last month, official figures indicated yesterday, in the most dramatic sign yet of the economic crisis engulfing the United States.

The worst monthly job loss figures in 34 years capped a week in which household names such as AT&T, the telecoms company, and Viacom, the entertainments business, laid off 33,000 people. The unwelcome unemployment data came as the number of people having their homes repossessed hit a record high.

Economists described the US economy as “in absolute free fall”. Nigel Gault, chief US economist at Global Insight, said: “Confidence has collapsed.”

The Labour Department reported that 533,000 workers had been laid off in November, 183,000 more than expected. It also said that almost 200,000 more people than originally thought had been dismissed in September and October. There are now 10.3 million Americans out of work, two million more than the population of New York City.

The shock figures sent the price of oil tumbling to a 3½year low after fears that the recession in the United States would further sap global demand for energy.

In London the price of a barrel of Brent crude oil for delivery next month slipped by $3.30 to $39.40. Crude prices hit their all-time high of $147 per barrel in July.

The dire job numbers added weight to expectations of another interest rate cut by the Federal Reserve on December 16. Interest rate futures were pricing in a half-point cut that would take the base rate to 0.5 per cent.

America’s jobless rate is now at 6.7 per cent, and employment figures are widely expected to worsen next year after a number of banks implement plans to cut thousands of staff.

The American car industry is also expected to lay off thousands of workers, taking the unemployment rate to an estimated 8 per cent by the end of the year. The “Big Three” – Chrysler, General Motors and Ford – have asked Congress for $34 billion (£23 billion) to bail out the industry.

Those people who have kept their jobs are also finding themselves worse off. Last month Employers cut workers’ hours to the shortest since records began, in 1964, reducing the average working week to 33½ hours.

Describing yesterday’s numbers as “almost indescribably terrible”, Ian Shepherdson, chief US economist at High Frequency Economics, said: “In the past six months, the United States has lost 1.55 million jobs, almost as many as were lost in the whole 2001 recession, which included 9/11 and the two months after. The pace of job losses is accelerating alarmingly.”

More than four million people are receiving unemployment benefits, the largest number in 26 years.

The growing army of jobseekers sent the rate of late mortgage repayments and home repossessions to record highs in the third quarter, according to the Mortgage Bankers Association (MBA). The MBA said yesterday that the share of loans in foreclosure hit 2.97 per cent in the three months to September 30, up from 2.75 per cent in the previous quarter.

The percentage of loans with overdue repayments rose to 6.99 per cent from 6.41 per cent. Loans that were 90 days or more overdue but not in foreclosure also rocketed to a record, indicating that banks were allowing homeowners more time to meet their mortgage commitments before repossessing their properties.

Jay Brinkmann, the chief economist at the MBA, gave warning that the figures would have been even more alarming had banks not agreed to give American mortgage-holders more breathing space in which to try to make their repayments.

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