Transcripts

Oil Prices & Unemployment Rock Wall Street

SUZANNE PRATT: Stocks tumbled today on the one-two punch of surging oil prices and a big jump in the nation's unemployment rate. The Dow plunged almost 400 points and the NASDAQ dropped 75. Those moves came as July light sweet crude futures soared nearly $11 a barrel, the biggest one-day price spike ever. Oil in New York trading settled at $138.54 a barrel, a new record. Fueling today's historic move, an escalating war of words between Israel and Iran. Israel's transport minister said that an attack on Iran's nuclear sites looked unavoidable. Against that backdrop, Wall Street also had to contend with the biggest one month increase in the unemployment rate since 1986. The Labor Department said the nation's jobless rate climbed to 5.5 percent in May from 5 percent in April. And the U.S. economy lost another 49,000 jobs in May, the fifth consecutive month of employment declines. As Scott Gurvey reports, today's data painted an unclear picture of the economy.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The half-point jump in the unemployment rate in May caught Wall Street and most economists by surprise. It was the biggest one month increase in 22 years. There was a big rise in the number of people looking for work and an unusually large number of those were young people. Economists noted the survey was taken later in the month than usual and speculated that students expected to enter the workforce in June were included in the May survey. Deutsche Asset Management's economist Joshua Feinman says he expects this to be accounted for when the unemployment rate is reported for June. But Feinman says this should not detract from the message of the overall trend.

JOSHUA FEINMAN, CHIEF ECONOMIST, DEUTSCHE ASSET MANAGEMENT: We had a trough in the unemployment rate of about 4.5 a year ago, so we've clearly moved up from that. Even if we're going to reverse a little bit of this month's, we're still notably higher than that and the reason is simple. The economy's not generating any jobs. And then so trend growth in the labor force is not being accommodated with job creation.

GURVEY: In fact, the number of jobs has fallen in each of the last five months -- 49,000 in May; 324,000 since the beginning of the year. The trouble spots remain construction and other sectors aligned with the housing market. Health care industries continued to add workers to their payrolls. While the labor market is acting as if the economy is in recession, other indicators seem to be signaling a slowdown short of actual negative growth. And economist Bruce Kasman of JPMorgan notes the job losses, while painful, have been steady and modest when compared to the numbers seen in previous recessions.

BRUCE KASMAN, CHIEF ECONOMIST, JPMORGAN: If there is any good news in the report it comes from the sense that the weakness isn't magnifying. It's basically been about the same as we've seen in recent months and I think from the perspective of the Fed, there's some comfort that softer labor markets are bringing unemployment rates to a position that may actually reduce inflation pressures down the road and perhaps allow them to stay in an accommodative position for somewhat longer.

GURVEY: Barney Frank, chairman of the House Financial Services Committee,

said today he thinks a second economic stimulus package might be in order to, as he put it, alleviate the suffering of individuals. The White House says it is studying all options. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.