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Dismal numbers on jobs, oil, stocks stir recession fears(Knight Ridder Washington Bureau (KRT) Via Acquire Media NewsEdge) WASHINGTON _ The U.S. economy entered dangerous new terrain Friday as crude oil prices leapt up by a record $10-plus a barrel, the unemployment rate notched its highest monthly jump in 22 years and growing fears of recession sent the stock market plummeting. The bleak day began with news from the Labor Department that the unemployment rate ticked up in May by a half-percentage point to 5.5 percent. The last time it jumped so much in one month was in 1986. The Bureau of Labor Statistics also said that employers shed 49,000 jobs, the fifth consecutive month of job losses. Contracts for deliveries next month of crude oil, called futures, then began climbing because of an escalation of saber-rattling between Israel and Iran, the world's fourth-largest oil exporter, whose location in the Persian Gulf means that any conflict would likely affect global oil supplies. By the time trading settled late Friday, oil futures had posted a record one-day move-up of $10.75 a barrel to $138.54. That was nearly twice the record uptick set just one day earlier of $5.49. Europe's central bank president, Jean-Claude Trichet, started the two-day surge in oil prices Thursday when he suggested that he might hike interest rates. That strengthened the euro, Europe's currency, against the dollar. Oil is priced in dollars on world markets; a weaker dollar vis-a-vis other leading currencies incites sellers to require higher prices. "This weekend is going to be very important. I think hopefully cooler heads will prevail and we can see a sell-off" next week, said Phil Flynn, an oil futures expert at Alaron Trading in Chicago. "The leaders of the world need to step up and acknowledge what happened here." The oil-producing cartel OPEC could help calm the markets and reduce supply fears, he said, by talking about boosting production. At the Pentagon, officials said that while Israel had made its concern about Iran's nuclear ambitions known, U.S. officials had no "specific information" that Israel was planning an attack. The United States also has no pending plans, Pentagon leaders said. "I am not aware of any effort by the U.S. military to assist in or conduct any military strikes against Iran," said a senior U.S. military official, who asked for anonymity to speak candidly. Adding to the glum news for motorists, investment bank Morgan Stanley predicted $150-a-barrel oil by the Fourth of July, and should a major hurricane hit production in the Gulf of Mexico, the sky could be the limit on oil prices. Americans are virtually assured now of paying far more than $4 a gallon for gasoline. The nationwide average, according to the AAA motor club, was already $3.98 on Friday afternoon, and that didn't reflect a $15-a-barrel rise in oil prices Thursday and Friday, which could tack on an additional 15 cents to a gallon of gasoline. As oil headed up, stocks dropped sharply. The Dow Jones Industrial Average plunged 394.64 points to 12,209.21, while the S&P 500 skidded 43.37 points to 1,360.68. The tech-heavy Nasdaq was off 75.38 points to 2,474.56. The takeaway for ordinary Americans is this: Already facing high energy prices, weak income growth and rising prices at the grocery store, they can add job security and recession to their list of economic concerns. "Recession is written all over the jobs numbers. The job losses are significant and broad across many industries and areas of the country," Mark Zandi, the chief economist for forecaster Moody's Economy.com, told McClatchy Newspapers. (EDITORS: STORY CAN END HERE) The surge in the unemployment rate probably overstates the job-market weakening in May, he said, because it could reflect college students looking for work early because they know it will be tougher to find jobs this summer. "Nonetheless, the job market is eroding and so too is the broader economy," Zandi said. President Bush spoke briefly about the economy Friday, using a swearing-in ceremony for his new housing secretary to say that the unemployment numbers were skewed by a larger-than-usual number of young people seeking employment. In a move that could affect the presumptive Republican presidential nominee, Sen. John McCain, Bush offered no remedies to the economic problems, just politics. Bush called on Democrats in Congress to pass legislation to allow more oil drilling in U.S. waters, and repeated his call to keep the tax cuts he moved through Congress in 2001 and 2003. "Congress needs to send a clear message that the tax relief we passed needs to be made permanent," he said. Neither of these issues will fix problems Americans are facing. Oil is a globally traded commodity, so adding more barrels here _ which would take years at best _ would help a bit eventually but is unlikely to have a great impact on global supplies. The president's tax cuts expire at the end of 2010; eliminating uncertainty about their future wouldn't much affect anyone's well-being now. Bush didn't mention the Commodity Futures Trading Commission, the federal body that regulates trading in oil contracts, which created an uproar last week by acknowledging that it was investigating the possible manipulation of oil prices by speculators. Adding to Friday's grim news was the U.S. dollar's slumping again. Earlier this week, Federal Reserve Chairman Ben Bernanke caused a stir by stressing the importance of a strong dollar, a task historically reserved for the treasury secretary. His words helped the greenback regain some ground temporarily but it fell Friday against the euro, which traded at $1.577 to the dollar. By talking up the dollar and watching it fall, Bernanke showed how little control policy-makers have over the currency's value. The Fed also is sure to find the jobs report troubling. When the economy slumps, monetary policy-makers usually want to cut interest rates to spark it. But Bernanke and other Fed leaders are increasingly hawkish about inflation threats, which argue for rate hikes. The soaring oil prices are sure to push inflation even higher as the costs of oil and related products cascade through the manufacturing supply chain all the way to the cash register for consumers. Friday's jobs data pointed to a continuing trend. The leading job-losing industries were construction and manufacturing, reflecting the slowdown in the housing and building sectors and weakening consumer demand as paychecks are stretched. The top job-creating sectors were education and health services. ___ (McClatchy Newspapers Pentagon correspondent Nancy A. Youssef contributed to this article.) ___ (c) 2008, McClatchy-Tribune Information Services. Visit the McClatchy Washington Bureau on the World Wide Web at www.mcclatchydc.com. _____ GRAPHICS (from MCT Graphics, 202-383-6064): 20080606 Unemployment, 20080606 Dow 15 min. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. Copyright ? 2008 McClatchy Newspapers |