Saturday, June 07, 2008

Biggest Jobless Jump Since 1986--Wall Street Sinks

Biggest jobless jump since '86 — Wall Street sinks

By JEANNINE AVERSA, AP Economics Writer
Fri Jun 6, 4:17 PM ET

Pink slips piled up and jobs disappeared into thin air in May as the nation's unemployment rate zoomed to 5.5 percent in the biggest one-month jump in decades. Wall Street swooned, and the White House said President Bush was considering new proposals to revive the economy.

Help-wanted signs are vanishing along with jobs, so the unemployment rate is likely to keep climbing, a government report indicated, underscoring the toll the housing and credit crises are taking on jobseekers, employers and the economy as a whole.

Adding to the pain, oil prices soared to a new record high, while the value of the dollar fell.

The Dow Jones industrials tumbled almost 400 points.

The White House snapped into crisis-management mode. The president is now considering further plans to help energize the economy, which had already been teetering on the edge of recession, said counselor Ed Gillespie.

Bush acknowledged, "This is a time of turbulence in the housing market and slow growth for our overall economy."

Pounded by soaring energy prices and plagued by uncertainty, nervous employers clamped down further on hiring in May.

Friday's Labor Department report was filled with sobering numbers:

• Employers eliminated 49,000 jobs in May, the fifth straight month of nationwide losses.

• The number of unemployed people grew by 861,000 — to 8.5 million.

• Job losses for the year reached 324,000.

Longer unemployment lines mean even more angst for those seeking work.

Barbara Bowens, 52, of Washington, D.C., has been laid off from a janitorial job since March. The prospects of finding a new job "don't look so good," she said. "I can't pay bills off nothing." Collecting unemployment benefits helps, but "I've got to pinch pennies."

Cheryl Williams, who lives in the Tulsa, Okla., suburb of Broken Arrow, has been looking for work for two years after losing her job as a certified nurse's aide. The 37-year-old relies on $225 a month in welfare and odds-and-ends jobs to support her two kids.

"I have job searched and job searched and job searched," Williams said. "I would like to have a real job."

Just in the past several days General Motors Corp., United Airlines and others have joined the flurry of job-cut announcements.

The unemployment rate shot up from 5 percent in April, reflecting more workers losing their jobs as well as an influx of young people looking for work. It was the biggest over-the-month swing in the rate since February 1986. The increase left the jobless rate at its highest since October 2004.

The unemployment rate for blacks climbed to 9.7 percent, the highest since late 2005. The rate for teenagers rose to 18.7 percent, the highest in five years. The rate for Hispanics held steady at 6.9 percent.

Economists believe the 5.5 percent nationwide unemployment rate may overstate the weakness in the job market. But they still say it's heading higher. Some predict it will hit 6 percent or higher early next year.

"Employers are uncertain about where the economy is going, so they are more cautious than they would normally be in pulling the hiring trigger," said Tig Gilliam, chief executive officer of Adecco North America, a placement and recruiting firm.

Both employers and workers, he said, are now inclined to look locally. The housing bust has made it difficult for people to sell their homes and relocate for new jobs. And galloping gas prices are making some jobseekers draw a line on commuting longer distances.

Drivers are now paying an average of $3.99 for a gallon of regular gas nationwide, according to AAA and the Oil Price Information Service; in many parts of the country, the price is already well over $4. Oil prices had been easing but surged higher on Friday, climbing above $139 a barrel at one point.

The 5.5 percent jobless rate is actually moderate by historical standards. Yet, there were harsh cuts last month as employers reduced jobs in manufacturing, construction, retailing and professional and businesses services. Those losses swamped gains elsewhere, including in the education and health fields, government, and leisure and hospitality, according to Friday's Labor Department report.

The jump in unemployment reflected more workers losing their jobs as well as an increase in those coming into the job market — especially younger people — to look for work, Labor's Bureau of Labor Statistics said.

A year ago, the number of unemployed stood at 6.9 million and the jobless rate was 4.5 percent.

The country's economic problems are a top concern for voters—and thus for Bush, lawmakers on Capitol Hill and candidates vying to win the White House this fall.

Barack Obama, the likely Democratic nominee, called the employment figures "deeply troubling," while Republican rival John McCain said they were a "stark reminder of the economic challenges facing American families." Both candidates pledged to turn around the economy.

Bush said the employment snapshot was "clearly a sign that is consistent with slow economic growth.

Employers — and the public — have been shaken by lots of talk about whether the economy is on the brink of or has fallen into its first recession since 2001. That determination, made by a panel of academics, is usually made well after the fact.

"For the average American there is not debate that the economy is in a recession," said Mark Zandi, chief economist at Moody's "That's because their net worth is lower, their purchasing power is lower and it is tough to find a job. If you lose a job, it is tough to get back in," he said.

Workers with jobs did see modest gains in May.

Average hourly earnings rose to $17.94, up 0.3 percent from April. Over the past 12 months, wages have grown by 3.5 percent.

Still, with lofty food and energy prices, paychecks aren't stretching as far. Although tax rebates helped to energize shoppers and give retailers better sales in May, the weakening job market could make people feel less inclined to spend, which would put a damper on overall economic growth.

Associated Press writers Christine Simmons in Washington and Justin Juozapavicius in Tulsa contributed to this report.

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