Economy Continues to Falter

The nation's unemployment rate shot to 5.5% in May from 5% in April, biggest monthly rise since 1986, the government said Friday, as employers cut 49,000 jobs. "The report has recession written all over it," says Mark Zandi, chief economist for Moody's Economy.com. "It's a big job decline, a large increase in the unemployment rate across all industries and across the country." May's loss of 49,000 jobs was up from a 28,000 loss in April and the fifth month in a row of job losses. The ranks of the unemployed rose to a seasonally adjusted 8.5 million in May, from 6.9 million a year earlier. The 5.5% unemployment rate is the highest since October 2004.

Oil prices soared to a record Friday, sending stocks into a tailspin and raising fears of inflation and recession. The price of a barrel of light, sweet crude leapt $10.75 to $138.54 Friday. It had spiked as high as $139.12. A brutal combination of forces sent oil skyrocketing: Israel's transportation minister said Friday that an attack on Iran was "unavoidable." Iran produces 4 million barrels of oil a day, and is the world's second-largest producer, behind Saudi Arabia. The U.S. dollar fell. A euro cost $1.5768 Friday, vs. $1.5593 on Thursday. Oil is priced in dollars, and when the dollar falls in value, oil prices rise. Investment bank Morgan Stanley predicted oil prices would hit $150 by July. Gasoline prices as measured in the daily AAA survey resumed their drive toward $4 a gallon Saturday. The national average price for regular unleaded gasoline rose 0.2 cent to $3.988 a gallon. The average is expected to top $4 in the next few days.

Any spike in prices begs the question: When will it end? Unfortunately, for millions of cash-strapped consumers, the cost of putting a meal on the table or a beer on the bar is likely to remain high for years, economists say. Typically, food price swings go through cycles that can last a few years. That was the case in the 1970s, when food prices were pushed up by high energy costs, decreased supplies and regional droughts. But those forces were fairly elastic, and prices contracted again. From the mid-1970s until recently, food prices on average fell dramatically. This spike is different. The reasons include the use of grains for fuel and the developing world's increasing demand for a higher-protein diet, which also cuts into grain supplies. Add those factors to more typical trends, like soaring energy costs, and it's clear the latest jump in prices has unique twists for consumers the world over, economists say. Perhaps most worrisome, some leading causes of the recent price increases show no signs of receding, prompting some economists to warn of "the end of cheap food."