Record Oil Spike, High Jobless Rate Sink Stock Market

Job losses continued in the construction industry, which has been hit hard by the housing downturn. That sector lost 34,000 positions in May and has now lost 475,000 jobs since its peak two years ago.

There were worrisome signs in the professional and business service sector, which has been a stalwart of job creation in the past year. It lost 39,000 jobs, most of them temporary workers who are often shed to avoid layoffs of permanent employees.

"It's a muddling economy that continues to muddle on," said John Silvia, chief economist at Wachovia.

The renewed upturn in oil prices left many oil experts shaking their heads. Earlier in the week, prices had begun to decline. In congressional testimony, legendary hedge fund manager George Soros warned of an oil price "bubble." The Commodity Futures Trading Commission said it was investigating price manipulation and warned traders.

But the six-year climb in oil prices and the doubling in prices over the past year have burned many oil traders who previously bet on dropping prices. That has left little resistance to those pushing prices up, said Adam Robinson, an oil analyst at Lehman Brothers.

Yesterday's increase comes on top of a nearly $5.50 increase the day before, for a two-day jump of $16.24 a barrel, or 13 percent.

The increase in heating oil prices broke the one-day trading limit on the New York Mercantile Exchange and triggered a brief trading halt. Morgan Stanley analyst Ole Slorer predicted that crude oil would reach $150 by Independence Day.

"This is the worst possible news at the worst possible time," said John Townsend, a spokesman for the auto club AAA. "Any hope we had of relief at the pumps won't happen soon."

Jeffrey Kupfer, acting deputy secretary of the Energy Department, called the high oil prices a serious problem. "It's taken us a long time to get into the situation that we're currently in. It's going to take us some time to get out of the situation that we're in," he said. "In our view, those prices are really the result of tight markets, tight fundamentals."

With consumption of gasoline slumping in the United States, one of the main drivers behind world oil demand has been China's rapidly rising imports of diesel fuel to make up for coal-fired electricity lost since the Sichuan province earthquake and to stockpile in advance of the Summer Olympics.

The Morgan Stanley analysis pointed to a sharp increase in eastbound oil shipments from the Middle East to Asia and a substantial drop in tankers heading west from the Middle East to Europe and the United States.

But other analysts questioned whether the rise of oil prices in Asia was sustainable absent strong demand in the United States. Lehman's Robinson noted that in countries like Vietnam, fuel and food make up the bulk of household expenditures and were pushing inflation to 25 percent. He said Asian central bankers may have to intervene.