WASHINGTON (Reuters) - Layoffs announced by U.S. employers surged in March to the highest level since the pandemic recession as the government purged federal workers and contractors to slash spending.

Global outplacement firm Challenger, Gray & Christmas said on Thursday that planned job cuts increased 60% to 275,240 last month, the highest level since May 2020, when the economy was reeling from the first wave of the COVID-19 pandemic. It was also the third highest monthly total on record.

About 497,052 layoffs were announced in the first three months of the year, the highest since the first quarter of 2009, when the economy was at the tail end of the Great Recession.

More than half of the job cuts were in Washington D.C., reflecting the federal government layoffs.

Challenger said it had over the past two months tracked 280,253 planned layoffs of federal workers and contractors impacting 27 agencies. Another 4,429 job cuts were from the downstream effect of cutting federal aid or ending contracts, impacting mostly non-profits and health organizations.

Tech billionaire Elon Musk's Department of Government Efficiency, or DOGE, has taken a chainsaw to the public workforce as part of an unprecedented campaign by President Donald Trump's administration to cut spending and downsize the government.

"Job cut announcements were dominated last month by Department of Government Efficiency plans to eliminate positions in the federal government," said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. "It would have otherwise been a fairly quiet month for layoffs."

MASS FIRINGS

The mass firings have not yet shown in official labor market data in a significant way as unions have challenged the dismissals in court. Judges have ordered the reinstatement of thousands of workers.

The purge continues, with layoffs of 10,000 staffers at health agencies this week.

Outside government, there were large increases in planned layoffs in the technology and retail sectors.

Hiring plans dropped to 13,198 from 34,580 in February. Companies intended to hire 53,867 workers in the first quarter. That was the lowest first-quarter total since 2012 and down 16% compared to the same period last year.

Challenger said it had tracked 3,972 rehired federal workers, who were included in March's hiring plans.

It said it did not count the tens of thousands of probationary workers who were fired by DOGE in the planned layoffs total. About 24,000 workers were ordered reinstated by courts. They were not included in the planned hiring figure for March, Challenger said.

"It is possible that some probationary employees were included in individual agency layoff plans," it said.

The government's closely watched employment report on Friday is likely to show that nonfarm payrolls increased by 135,000 jobs in March after rising 151,000 in February, a Reuters survey predicted. The unemployment rate is forecast unchanged at 4.1%.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)