Wall Street is expecting the biggest rise in America's unemployment for almost 60 years when Washington publishes official data tomorrow, indicating that the world's biggest economy is plunging into a deep and protracted recession.

Shares on Wall Street and the US dollar both sank yesterday amid grim evidence that the economy is deteriorating far more quickly than forecast previously. Traders also took fright after Intel, the world's biggest maker of microchips, and Time Warner, the cable-television group, issued drastic profit warnings.

According to the ADP Employers' Services survey, 693,000 workers lost their jobs in the private sector last month, well above expectations of 495,000. Yesterday's private sector jobs data points to an overall increase in unemployment across America of about 700,000. That would represent the sharpest rise for 59 years.

Ian Shepherdson, of High Frequency Economics, said: “This is shockingly awful. The bulk of the deterioration in ADP jobs is in small and medium-sized firms, though losses at big firms are increasing, too. Service sector losses are rising fastest. We await Friday with trepidation.”

The jobs data and the two profit warnings stunned Wall Street, where the Dow Jones industrial average sank by 245.40 points, or about 3 per cent, to 8,769.70. Fear that America's recession may extend well into 2010 also hit the dollar hard. Sterling rose by almost five cents against the dollar, from Tuesday's close, climbing from $1.4686 to $1.5161 by the London close.

Intel, which ships 80 per cent of the world's microchips, shocked Wall Street by giving warning that sales had plunged by almost a quarter as global demand for laptops and mobile phones dried up.

The group indicated that it had been taken unawares by the speed of the economic downturn in both the United States and overseas as sales fell even lower than revised forecasts made only in November.

Intel said that fourth-quarter sales had fallen by 23 per cent, against a year ago. Its shares fell by 6 per cent to $14.44, having already come down from about $24 in August.

Intel's performance is watched by Wall Street as a barometer of corporate America and the global economy. Last summer, companies such as Intel and Microsoft sought to reassure the stock market by saying that although banks were in chaos and other industries, such as construction and retailing, were suffering, their long-term order books looked healthy.

Time Warner's shares slid by 6 per cent after it gave warning that it would plunge into the red as it writes $25 billion off its books. The owner of the CNN news channel and Time magazine provided new evidence that the recession is engulfing all corporate America.

A slide in advertising and the plunging value of cable television franchising rights forced it to admit that its results would fail even to meet forecasts that it lowered in November.

The company now expects growth in operating income of just 1 per cent, after a previous forecast of 5 per cent.

The US economy is expected to shrink by 2.2 per cent this year, and unemployment will rise to 8.3 per cent, according to forecasts from the Congressional Budget Office yesterday.

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