WASHINGTON (BLOOMBERG, NYTIMES) - In an early sign of the coronavirus pandemic's devastating effect on American workers, the Labor Department on Thursday (March 19) reported a 30 per cent increase in unemployment claims last week to a 2½-year high, one of the largest spikes on record.

The surge - 281,000 new claims - reflects a crushing new reality: Any hopes that businesses could keep their staffs largely intact have quickly evaporated.

The number may be poised to surge into the millions next week as much of the economy shuts down to fight the pandemic. Pantheon Macroeconomics chief economist Ian Shepherdson estimates 2 million claims for next week's report.

"It appears from state numbers that the order of magnitude increase compared to normal is about 10," he said Thursday.

Elsewhere on Thursday, the Federal Reserve Bank of Philadelphia's survey of factories showed conditions in the area deteriorated in March by the most on record, indicating the heavy toll on demand from the virus battle extends to more of the nation's producers.

US jobless claims, reported with a one-week lag, are one of the best real-time indicators of labour-market health. The full effect of the job losses likely won't be evident until the April unemployment data given the majority of reported layoffs occurred after the Labor Department's reference week. That data is set to be released on May 8.

Potentially millions of Americans likely to lose jobs as the virus halts travel and events. It's forced restaurants and bars to close and slowed business to a crawl in any still open. As more people stay home, a swath of businesses - from coffee shops to dentist offices - are also laying off workers.

"I started laying people off this Monday, not knowing how bad it was," said Barry Rosenberg, founder of Vending One, a Los Angeles company that stocks and maintains vending machines and self-serve kiosks in malls, office complexes, jails, schools and casinos. "On Tuesday, we started restricting hours. By next Monday, I don't know that they'll be any work."

Jon Blomer, who services accounts and refills those machines, was one of the first to lose his job. "There's not enough hours to go around, and everyone's been there longer," said Blomer, 33, who has worked for at Vending One for a year. "I understand."

As employers and workers at global conglomerates and kitchen-table offices anxiously grapple with the economy's partial shutdown, officials in Washington are racing to design a US$1 trillion (S$1.45 trillion) rescue plan. Senate Republicans put forward a blueprint on Thursday that includes loans to big corporations and small businesses, large corporate tax cuts, and US$1,200 checks for taxpayers.

US President Donald Trump said he would be open to having the government take equity stakes in companies that require federal help. But Democrats are pushing to direct more assistance to workers and families rather than to corporations.

In the meantime, tens of thousands of laid-off workers like Blomer are jamming government websites and phone lines to apply for unemployment benefits.

The report from the Labor Department offered just a pinhole glance of mounting job losses.

In Connecticut, 30,000 claims were filed between Friday evening and Tuesday, compared with a total of 2,500 all last week. This week, Illinois received over 41,000 claims on Monday and Tuesday compared with 4,445 in those two days last year. And in Michigan, 5,419 claims were filed in February's final week; so far this week, the state is fielding 5 ½ times as many. In some states, overwhelmed systems collapsed.

"It was so frustrating," said Tim Tilley, who was laid off from his kitchen job at an Olive Garden in Ohio on Tuesday. For four hours that day and eight hours on Wednesday, he tried to file a claim. The website crashed repeatedly - after three attempts, he was locked out. He called dozens of times but was bumped from prompt to prompt, only to end up at the original automated message.

Rules for unemployment benefits vary across the country. States follow federal guidelines but administer their own programmes. Each state uses its own formula to decide what percentage of weekly wages will be covered (50 per times example) and for how long (generally 26 weeks).

The Renaissance Allentown Hotel, one of City Center's properties and part of the Marriott chain, is laying off virtually all of its more than 100 workers at 5 p.m. local time on Friday. Charles Reece, the general manager, is one of a handful of employees who will stay on for a couple of weeks to wrap up.

"I suppose I will be applying for unemployment benefits," Reece said. "I haven't even thought about myself, because there is so much to do in closing."

Planning ahead is nearly impossible, employers and workers say, without knowing how long the crisis will last or how much government assistance might be available.

About a dozen states, including New York, California and Illinois, have turned to more drastic measures in an attempt to contain the virus, including closing restaurants and bars to dine-in customers. One estimate says the US restaurant industry is poised to lose 7.4 million jobs.

Marriott International has started furloughs that could hit tens of thousands, and the American Hotel & Lodging Association projects the industry will be forced to shed one million jobs in coming weeks.

The national jobless rate could surge above 8 per cent in the next three months, according to Bloomberg News calculations based on estimates for payroll cuts from the restaurant and lodging industry groups. It stood at a half-century low of 3.5 per cent in February, down from a 26-year peak of 10 per cent just after the last recession.

Greg Brown, finance professor at the University of North Carolina's Kenan-Flagler Business School and a former Federal Reserve Board researcher, said the jobless rate will rise as high as 9 per cent.

JPMorgan Chase & Co chief US economist Michael Feroli wrote Wednesday that the rate will probably rise to 6.25 per cent by mid-year and ease back to 5.25 per cent by year-end, based on his downgraded forecast calling for the economy to shrink at a 4 per cent annualized pace in the first quarter and 14 per cent in the following three months.