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A barrage of bad news raises worries on economy

Soaring oil prices, plunging stocks and the biggest jump in unemployment in more than 20 years. That's what you call a really bad day.

Friday's dismal news on multiple fronts unleashed a new wave of worrying about the economy. What many investors fear could be coming is a prolonged period of inflation and subpar growth.

"The biggest concern right now is oil and its potential for a stagflationary environment," said Bill Knapp, investment strategist for MainStay Investments.

Morgan Stanley analyst Ole Slorer predicted Friday that crude oil would reach $150 a barrel by July 4. His reasoning: strong demand in Asia and lower inventories.

The bad news on oil is being reflected in the job market, where national unemployment is at its highest rate since late 2004. A major reason was an influx of people who hadn't been looking for jobs. Some are young people looking for their first jobs, but many more are re-entrants — people who previously worked and want to get back on the job.

"If you're retired and you see prices of things rising much more rapidly than perhaps you've planned, that might be forcing you to re-enter the workplace," said University of Central Florida economist Sean Snaith. "Moms who have been staying home to take care of their children might rethink that decision in light of what you have to pay for a gallon of milk and bread and cereal, not to mention gas."

He said higher gas prices are likely a factor driving more teens to seek work. He predicts unemployment will peak this year at around 6 percent. Unemployment in Florida was at 4.9 percent in April and likely rose in May, but state statistics won't be available until June 20.

Jobs continued to grow last month in education and health care, government and hospitality, but those gains were more than offset by continued losses in manufacturing and construction.

Helen Huntley can be reached at hhuntley@sptimes.com or (727) 893-8230.

FAST FACTS

Who's newly looking for work

High school and college graduates may be ready for the job market, but it's not ready for them. New entrants to the workforce made up about 10 percent of the unemployed in May.

Re-entrants: People who have been out of the work force, such as retirees and stay-at-home moms, want to go back to work, but lots of them can't find jobs. The number of unemployed re-entrants rose 15 percent in May.

Teenagers: Teenage unemployment (ages 16-19) jumped from 15.4 percent to 18.7 percent in May.

Jobs vanish

Employers wiped out 49,000 jobs in May, causing the biggest month-to-month jump in the nation's jobless rate in 22 years, to 5.5 percent from 5 percent. Unemployment is the highest it has been since October 2004.
Oil price soars

Combined with Thursday's increase of almost $5.50 a barrel, Friday's meteoric rise by $11 to $138.54 means oil futures jumped more than 13 percent in just two days. Analysts think the price will hit $150 by the Fourth of July, with gasoline prices rising, too.
Dow plummets

The jobless and oil news made investors jittery. The Dow Jones' 394-point decline was the worst percentage and point drop since Feb. 27, 2007, and left the market down 3.39 percent for the week.

A barrage of bad news raises worries on economy 06/06/08 [Last modified: Monday, June 9, 2008 10:52am]
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