Jobless Rate Takes Biggest Jump in 22 Years

The unemployment rate jumped by the most in 22 years in May, reaching its highest level in more than 3-1/2 years and underscoring the recessionary risk the economy still faces.

CNBC.com

Combined with soaring oil, the unemployment number renewed fears that economic woes would prevent any sustainable upward move in the stock market.

"We had seen some decent economic data recently, so people were hoping that we turned the corner," said Ryan Detrick, an analyst at Schaeffer's Investment Research. "Today was just another knock that showed maybe we're not quite ready."

The jobless rate rose to 5.5 percent last month from 5 percent, its highest level since October 2004, the Labor Department said on Friday. Some 49,000 jobs were cut from payrolls in May, the fifth straight month of job losses.

Wall Street economists surveyed by Reuters forecast that 58,000 jobs would be lost in May, but had foreseen the unemployment rate rising only to 5.1 percent. So far in 2008, job losses have totaled 324,000, the department said.

"The data definitely points to the fact that this economy is struggling to grow," said Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank Private Wealth Management in New York.

The unemployment rate and the number of jobs added or lost each month are based on separate surveys, so it is possible for the rate to rise disproportionately to the amount of jobs lost.

The surprisingly high jobless rate shocked financial markets, causing prices for U.S. Treasury bonds to rise as investors bet the dismal employment outlook pushed back any possibility of early interest-rate rises from the Federal Reserve.

The dollar's value fell against other major currencies and stock futures dropped.

"Anytime we see bad news like this the market's going to take a hit. There's nothing really good that we can point to and say, 'Yeah, but ...'" said Matthew Tuttle, president of Tuttle Wealth Management.

"That's a horrible number, just horrible," added Dave Rovelli, head of US equity trading at Canaccord Adams.

The jump in the jobless rate reflected, in part, a surge of workers entering the work force.

The number of people in the work force climbed by 577,000 in May, up sharply from an increase of 173,000 in April.

Department officials noted that in the period from April through July, there typically is an increase in the number of young people seeking temporary work when school is out.

Analysts said the higher unemployment rate was likely to further sap consumer optimism.

"We've seen consumer sentiment drop sharply in recent months and it does indicate that people are either losing their jobs or having a difficult time finding a job if they are looking for one or trying to enter the work force," said Gary Thayer, senior economist with Wachovia Securities in St. Louis, Mo.

There were substantial job losses in May in construction industries where 34,000 cuts were made, in manufacturing where 26,000 jobs were lost, and among providers of professional services where 39,000 jobs were lost.

U.S. employers shed jobs for a fifth straight month in May and the unemployment rate jumped to its highest in more than 3-1/2 years, partly because more people were trying to come back into the workforce, a Labor Department report on Friday showed.

The unemployment rate rose to 5.5 percent last month from 5 percent, its highest level since October 2004. Some 49,000 jobs were cut from payrolls in May, up from a revised 28,000 that were lost in April.

Wall Street economists surveyed by Reuters forecast that 58,000 jobs would be lost in May but had foreseen the unemployment rate rising only to 5.1 percent. So far in 2008, job losses have totaled 324,000, the department said.

The number of people in the workforce climbed by 577,000 in May, up sharply from an increase of 173,000 in April.

Department officials noted that in the period from April through July, there typically is an increase in the numbers of young people seeking temporary work when school is out.

There were substantial job losses in May in construction industries where 34,000 cuts were made, in manufacturing where 26,000 jobs were lost, and among providers of professional services where 39,000 jobs were lost.

© 2008 CNBC.com