Midwest hit hard in jobs report

Jobs in the Midwest were among the hardest hit in May, as the nation's unemployment rate zoomed to 5.5 percent in the biggest one-month jump in decades.

In the wake of the national Labor Department monthly jobless report Friday, Wall Street swooned -- the Dow Jones industrials falling more than 3 percent, or 394.6 points. And as oil prices soared to $139 a barrel, the White House said President Bush is considering new proposals to revive the economy.

Among the categories most affected in the jobless report was retail trade, which includes a key part of the Chicago-area economy: the automotive sector.

U.S. automakers have been laying off workers and struggling with sales and rising fuel prices, according to DePaul University Associate Professor Mike Miller.

"There has been a general slowdown in manufacturing, particularly in autos," said Miller, adding the Chicago area is a major supplier to the Detroit automakers.

Auto dealers, home furnishing stores, department stores, transportation and warehousing, and financial services all were hit, according to the U.S. Department of Labor estimates.

All are strong economic influences in the Chicago area economy, Miller said.

Hoffman Estates-based Sears Holdings is the largest department store chain in the country. Towns like Elk Grove Village, Hanover Park and others are heavily dependent on warehousing and transportation employment. And the Chicago area has long been one of the nation's biggest financial centers, Miller noted.

Just in the past several days, General Motors Corp. and Chicago-based United Airlines announced major staff reductions.

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

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

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

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.

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.

But there's another story behind the numbers, according to some economists.

"Half that increase came straight out of teenagers and early twenty-somethings who couldn't find work," said David Rosenberg, North American economist at Merrill Lynch & Co.

The unemployment rate for teenagers jumped from 15.4 percent in April to 18.7 percent in May, an unusually sharp increase.

"That tells you something about what's happening at the family level," Rosenberg said. "Parents are telling their kids to look for work, and the jobs aren't there."

In contrast, weekly unemployment claims fell to 357,000 the final week in May, the lowest in four weeks and below the 400,000 weekly figure some economists say signals a recession.

"Remember, students looking for summer work cannot file for unemployment benefits, so the weekly claims report provides a more accurate picture of the job market," said Bernard Baumohl, author of "The Secrets of Economic Indicators."

In many parts of the country, the gasoline prices are already well over $4. Oil prices had been easing but surged higher Friday, climbing above $139 a barrel at one point.

Sectors that remained strong included education and health fields, government, and leisure and hospitality, according to Friday's Labor Department report.

Jobless: Rates may be higher due to teens without jobs