USD Gains A Bit As Oil Price Decline

1440 GMT [Dow Jones] USD is reversing some of its modest losses against the euro as US oil stockpiles rise, causing global oil prices to decline. But USD ranges are holding as markets wait for the FOMC statement in the afternoon. Recently, EUR/USD was at 1.5586 from 1.5572 late Tue, while USD/JPY was at 108.02 from 107.79. (DKM)

Contact us in New York. Darlene Ross, 201 938-2085;

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(END) Dow Jones Newswires

June 25, 2008 10:40 ET (14:40 GMT)

FOMC:Meeting Begins At 9:00 AM ET As Scheduled

2008.06.25 15:01:07 *FOMC:Meeting Begins At 9:00 AM ET As Scheduled

2008.06.25 15:02:09 FOMC Resumes 2-Day Meeting At 9:00 AM EST, As Scheduled

WASHINGTON (Dow Jones)--The Federal Open Market Committee resumed its two-day meeting at 9:00 a.m. EDT Wednesday, as scheduled, a Federal Reserve spokeswoman said.

Following the meeting's conclusion, the committee is expected to announce any decision it makes on short-term interest rates and issue an accompanying statement on the economy at about 2:15 p.m. EDT Wednesday.

With the FOMC widely-anticipated to hold the fed funds rate steady at 2.00%, the statement will be scrutinized even more than usual for any hint of the central bank's next step.

From September to April, the Fed aggressively cut the short-term interest rate target by 3.25 percentage points to just 2% in effort to prevent the economy from tipping into recession. A housing market rocked by widespread foreclosures has been weighing on the economy as well as a related credit crunch.

At the same time, central bankers around the globe have recently raised greater concern about high energy and food prices and their impact on inflation expectations. Fed watchers see policymakers trying to reflect those greater inflation concerns in the statement - without signaling that rate hikes are imminent.

-By Maya Jackson Randall; Dow Jones Newswires; 202 862 9255; maya.jackson-randall@dowjones.com

Corrected June 25, 2008 09:34 ET (13:34 GMT)

(END) Dow Jones Newswires

June 25, 2008 09:02 ET (13:02 GMT)

USD Sticks To Narrow Range Ahead Of FOMC

1210 GMT [Dow Jones] USD declined slightly against the euro but rose versus the yen, staying within a narrow range ahead of the FOMC interest rate announcement, scheduled at 2.15 p.m. EDT. Even hawkish remarks from ECB president Trichet only gave the euro a slight boost. But before the FOMC meeting closes, the market will also take notice to the release of May durable goods at 8.30 a.m. EDT, followed by May new home sales at 10 a.m. EDT. Wed morning in NY, EUR/USD was at 1.5590 from 1.5572 late Tue, while USD/JPY was at 107.96 from 107.79. EUR/JPY was at 168.33 from 167.86 late Tue, according to EBS. GBP/USD was at 1.9723 from 1.9697, and USD/CHF was at 1.0403 from 1.0412. (YUS)

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(END) Dow Jones Newswires

June 25, 2008 08:11 ET (12:11 GMT)

European Summary

Bond futures contracts drifted in light, rangebound trading Wednesday as markets braced for the FOMC interest rate decision, due 1815 GMT. ECB president Trichet's testimony before the EU parliament provided a brief flurry of activity. September bunds printed a session low after Trichet voiced conazcern that high inflation in the euro zone was becoming entrenched. Trichet later clarified his comments. While not ruling out a rate hike at next week's ECB meeting, Trichet reiterated he didn't envisage a series of rate hikes.

At 1100 GMT, the September bund contract was down 0.18 at 110.40, within a 110.23-110.51 range, while December euribor was unchanged at 94.75. Gilts outperformed bunds, with muted reaction to CBI retail sales volume data, -9 in June from -14 in May, versus forecast -17. At 1100 GMT, September gilts were unchanged at 104.18, in a 103.91-104.20 range, while December short sterling was up 0.035 at 93.75. The FX market took a very hawkish Trichet, with backup comments from ECB's Noyer and Tumpel-Gugerell as a sign that a rate hike next week is a done deal.

EUR/USD held close to the day's high of 1.5602 in the aftermath. The greenback also slipped against sterling, thanks in part to the CBI survey with GBP/USD comfortably back above 1.97. JPY continues to underperform, a positive session for stocks [Europe +0.3% to +0.8%] encouraged risk appettite, EUR/JPY traded just shy of Monday's 11 month 168.38 high while USD/JPY holds just under 108.00. Oil hovers around $137bbl.

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(END) Dow Jones Newswires

June 25, 2008 07:59 ET (11:59 GMT)

UK Brown: Will Act On Any Evidence Of Oil Mkt Manipulation

2008.06.25 13:10:33 *UK Brown: Will Act On Any Evidence Of Oil Mkt Manipulation

2008.06.25 13:11:18 *UK Brown: FSA Looking At Any Evidence Of Oil Mkt Manipulation

2008.06.25 13:18:10 *UK Brown:3-Yr Public Sector Pay Deals A Barrier Vs Inflation

LONDON (Dow Jones)--The U.K. government will act if there's any evidence of manipulation in the oil markets and the Financial Services Authority is examining whether that has taken place, Prime Minister Gordon Brown said Wednesday.

"The Financial Services Authority is looking at any evidence of market manipulation. The Treasury is looking at what financial" manipulation "may have taken place in the market place. If there is any evidence of this we will act," Brown told lawmakers.

However, Brown said soaring energy prices were being driven higher because "demand for oil in the world exceeds the supply of oil and it will exceed the supply of oil for years to come."

Brown's comments came in response to a question about the U.S. Congress' examination of what role speculation was playing in driving up energy prices.

A panel of experts Monday told U.S. lawmakers oil prices could fall to half their current levels if regulators took measures like forcing investors in energy futures to put up much more margin on their trades or prevented certain investors from engaging in futures markets.

Asked about strike threats from local government workers, Brown said three-year pay deals for the public sector were "a unique barrier against inflation."

He said the modest wage rises would provide a "signal to the rest of the public sector and the private" that limited pay rises were needed to curtail the impact of price pressures.

-By Laurence Norman, Dow Jones Newswires; 44-207-842-9270; laurence.norman@dowjones.com

(END) Dow Jones Newswires

June 25, 2008 07:44 ET (11:44 GMT)

CORRECT: IMF's Strauss-Kahn: Chinese Yuan 'Substantially' Undervalued -2-

2008.06.25 12:44:27
The managing director of the International Monetary Fund, Dominique Strauss-Kahn, said Tuesday on the sidelines of a meeting of finance ministers from the Americas and the Caribbean that the valuation of the renminbi is not the only cause for global imbalances at all, but it's part of it.

The renminbi is also known as the yuan.

(In a story published June 24 at 3:11 p.m., EDT, "IMF's Strauss-Kahn: Chinese Yuan 'Substantially' Undervalued," the name of the currency was misspelled throughout)

(END) Dow Jones Newswires

June 25, 2008 04:25 ET (08:25 GMT)

Trichet: ECB Considers "Small" Rate Hike July 3

BRUSSELS (Dow Jones)--European Central Bank President Jean-Claude Trichet repeated Wednesday that the rate-setting ECB governing council could raise the key interest rate July 3, but refused to comment on policy action further down the road to combat runaway inflation.

Trichet told the European Parliament Committee on Economic and Monetary Affairs in Brussels that the governing council may raise the ECB's main refinancing interest rate "by a small amount" to 4.25% from 4% currently, to anchor inflation expectations.

"I said it's possible," Trichet said, adding that markets participants had given this message the necessary attention.

2008.06.25 12:25:14
The ECB is widely expected to hike its key interest rate at the governing council's July 3 meeting.

When asked which trajectory the ECB would likely envisage for its monetary policy after the next meeting, Trichet refused to make any specific comments.

"I didn't say, we would envisage a series of increases. I didn't say that!" Trichet said. "We never precommit."

Trichet said the no-precommitment policy is lending credibility to the ECB, which was crucial for the conduct of monetary policy and its fight against inflation.

Trichet described himself as they only messenger conveying the governing council's mutual view.

He said the governing council is in a state of "heightened alertness," against a backdrop of significant upside risks to price stability.

The risks of triggering a wage-price inflation spiral currently "is particularly acute," he said.

Recent spikes in the euro zone's consumer price index may mislead people into believing that high inflation is here to stay, Trichet said, adding that it's imperative to keep private inflation expectations at levels consistent with price stability.

The ECB defines price stability as an inflation rate of just below 2% over the medium term.

However, the CPI averaged 3.7% in the 15 countries that share the euro and is expected to stay above 3.0% for the remainder of the year, mainly driven by rampaging oil and energy prices.

It's absolutely essential that the world's oil producers recently pledged to do "what they can to augment" upstream production, .

Trichet said he's not so sure that "that speculation is the major culprit" to blame for surging oil prices, but he rather thinks the oil price is mainly a function of "very, very active demand" and rather steady supply.

He added that financial markets likely underestimated the global demand for raw materials and oil, in particular in the past.

He said current price movements were a result of reallocation in portfolios.

ECB Web site: www.ecb.int

-By Roman Kessler, Nina Koeppen and Adam Cohen, Dow Jones Newswires; +4969 2972 5514, roman.kessler@dowjones.com

(END) Dow Jones Newswires

June 25, 2008 06:25 ET (10:25 GMT)

UK Can't Fight Two Wars

2008.06.25 03:21:37 *UK Military Chief: UK Can't Fight Two Wars At The Same Time

G8 May Talk FX But Won't Be On Communique

0151 GMT [Dow Jones] Comments from Japan MOF official echo view of many FX traders: Tells Dow Jones that G8 finance ministers may discuss FX (especially given everything that has happened of late on USD); but adds FX won't be part of formal G8 communique. Japan Vice Finance Minister Tsuda weeks ago said main discussion themes would be 1) world economy and issues surrounding it, 2) climate issues and 3) development issues; many analysts expect a large focus on high oil prices. FX would naturally be a part of such discussions, but unlikely to be key focus, especially as central bankers not taking part. Traders say they don't expect G8 to mention anything on FX beyond what was said at last G7 meeting.(TMO)

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BREAKING NEWS: FPI Cabang Bolaangmongondow Dideklarasikan

from SCTV first published on 11/06/2008 09:05 GMT +7



Liputan6.com, Bolaangmongondow:


Ditengah maraknya tuntuan agar Front Pembela Islam dibubarkan, sejumlah pemuda Islam ini bersama beberapa tokoh masyarakat termasuk dua anggota DPRD membentuk sekaligus mendeklarasikan FPI cabang Bolaangmongondow. Kegiatan yang dilakukan sangat sederhana ini berlangsung di Masjid Raya Kotamobagu.

Agenda pertama yang akan dilakukan pengurus adalah menjaring anggota sekaligus penyadaran agar agar mereka menjadi umat Islam yang kaffah. Pembentukan FPI cabang Bolaangmongondow ini sebenarnya sudah lama dikoordinasikan dengan FPI pusat.

Sementara itu, di Bolaangmongondow saat ini terdapat sekitar seribuan jamaah Ahmadiyah. Saat ini mereka sudah memiliki masjid di daerah Motoboi, Kotamobagu. Kehadiran FPI dan Ahmadiyah di daerah ini dikhawatikran memicu terjadinya kekerasan.(IAN/Tim Liputan 6 SCTV)

BBM dan Kursi Istana

Harga minyak dunia terus melambung. Jika harga bahan bakar minyak (BBM) tak dinaikkan, anggaran pemerintah bakal jebol. Pembangunan di banyak bidang macet. Presiden Susilo Bambang Yudhoyono memilih melanggar janjinya.

Lalu, terbit pengumuman bahwa harga bahan bakar minyak (BBM) akan dinaikkan. Padahal, Pemilu 2009 tak lama lagi. Yudhoyono bersiteguh. Ia bercerita, ada pihak yang menyarankan agar kenaikan BBM dilakukan setelah pemilihan presiden. "Kalau itu yang menjadi pertimbangan, salah. Berdosa saya, berarti hanya mementingkan diri sendiri," kata Presiden.

Keputusan menaikkan harga BBM diperkirakan bakal membikin Yudhoyono harus bekerja lebih keras jika masih ingin berkuasa. Sejauh ini, memang sejumlah survei menyebut anak Pacitan, Jawa Timur, itu masih tokoh terpopuler untuk menjadi Presiden RI 2009-2014.

Bisa dipastikan, lawan-lawan politik akan memanfaatkan isu ini untuk menghantamnya. Mereka bakal menuding pencabutan subsidi BBM adalah bukti otentik bahwa Yudhoyono tidak pro-rakyat, pengikut neoliberalisme. Ingat, politik adalah juga seni menemukan dan mengkampanyekan kelemahan lawan.

Tentu, Yudhoyono tak bisa dengan gampang bilang, “Saya siap tidak populer” seperti yang pernah diucapkannya pada 2005. Ia baru saja menang saat itu. Kini, ia harus jauh lebih berhati-hati atau hanya menjadi presiden selama satu periode.

Jika mau “aman,” seharusnya Yudhoyono menyambar opsi-opsi lain, yang tak akan menyebabkan dirinya dituding abai atas penderitaan rakyat. Opsi-opsi itu tersedia. Namun, ia menampik. Ia menggiring dirinya sendiri ke kancah bahaya. Logikanya, pasti ada kepentingan lebih besar yang tengah dia bela.

Bagaimana pun, Yudhoyono mungkin tak perlu terlalu cemas kehilangan banyak konstituen. Itu terjadi jika bantuan tunai langsung (BLT) plus yang digulirkan tepat sasaran. Seperti diketahui, BLT plus akan berupa kucurang duit tunai ditambah bahan pangan yang di antaranya minyak goreng dan gula pasir.

Hanya keledai yang terjungkal dua kali di lubang yang sama. Pada 2005, pemerintah menggulirkan program BLT. Sayangnya, penyaluran BLT sebagai kompensasi pemotongan subsidi BBM hanya mencapai 54,96 persen. Ini pengakuan pihak pemerintah sendiri. Sisanya keliru alamat.

Kini, mestinya sebab-sebab yang membuat program itu tak bisa mendekati 100 persen keberhasilan sudah diidentifikasi. Yudhoyono dikelilingi orang-orang pintar yang seyogyanya sanggup memetik pelajaran dari kasus BLT terdahulu.

Akhir kata, persoalan BBM sangat dekat dengan gonjang-ganjing perebutan kursi RI 1. Yudhoyono pun amat menyadarinya. Barangkali termasuk jika keputusan sekarang membuatnya harus mengemas koper dan tak lagi berkantor di Istana. Yang pasti, ia telah tercatat: berani mengambil risiko demi kepentingan lebih besar dan mendasar.

BLT, Cukup untuk Berapa Hari?

Keputusan sudah diketuk. Presiden Susilo Bambang Yudhoyono menerbitkan Inpres 3/2008 Pelaksanaan Bantuan Langsung Tunai (BLT). Bantuan akan diberikan selama tujuh bulan antara Juni hingga Desember nanti. Setiap Rumah Tangga Miskin (RTM) akan memperoleh Rp 100 ribu/bulan. Seperti 2005 lalu, BLT kali ini digulirkan untuk membantu warga miskin menanggung biaya hidup akibat kenaikan harga BBM kelak..

Sejak diskursus BLT diapungkan pemerintah, segenap kritik mengemuka. Antara lain soal efektivitas program ini dalam membantu warga miskin, kengototan pemerintah mempertahankan data warga miskin 2005, hingga besaran BLT yang tak memperhitungkan inflasi.

Pemerintah tak mengambil pelajaran dari pelaksanaan BLT selama 2005-2007. Alih-alih mengevaluasi, pemerintah main gampang saja menetapkan misi: BLT berguna lantaran dana yang dibagikan tersebut akan membantu menangkal merangkaknya harga kebutuhan pokok. Ditonjolkan sebuah public relation—kalau bukan "propaganda"—bahwa BLT positif mengerem subsidi BBM. Menurut pemerintah, ketimbang subsidi BBM mengalir ke kalangan tak tepat sasaran, lebih baik diberikan kepada warga miskin.

Tapi, bagaimana mencari pembenaran BLT jika data warga miskin tidak di-update dan besarannya tetap? Di sini pemerintah bermain-main dengan "bola api" yang bisa memantik kekisruhan dalam penyaluran BLT nanti. Pemerintah tak menepis bahwa data warga miskin bertambah, tapi tetap saja data lama yang akan dipakai. Alasannya klise. Menurut Kepala Badan Pusat Statistik Rusman Heriawan, proses pemutakhiran data tengah dilakukan. Alhasil penyaluran BLT akan menggunakan data lama pada 5.300 kecamatan. Jumlah penerima BLT 19,1 juta keluarga.

Jelas tampak belum mulus sinkronisasi kebijakan di pemerintahan Yudhoyono-Kalla. Kebijakan komprehensif jauh panggang dari api. Yang ada tambal sulam, parsial, dan menggampangkan persoalan.

Tidakkah pemerintah empati dengan keluarga miskin yang tak menerima BLT gara-gara namanya tak tercatat di kartu miskin yang dikeluarkan PT Pos Indonesia? Dan, bagaimana jika sesama warga miskin saling berebut karena merasa lebih berhak menerima BLT? Sudahkah pemerintah menghitung kembali risiko sosialnya? Lewat catatan ini, kita ingin mengingatkan pemerintah bahwa tahun politik harus diwaspadai lantaran "tensi" rakyat juga mudah menggelegak.

Di atas segalanya cukupkah Rp 100 ribu? Mari berhitung. BPS (2005) menyebutkan, konsumsi beras warga Indonesia sekitar 7,05 kilogram/bulan/kapita. Jika RTM hanya makan sebanyak 1-2 kali sehari, konsumsi berasnya setara 4,7 kilogram/bulan/kapita. Katakanlah beras yang dimakan mereka berkualitas rendah seharga Rp 3.500 per kilogram, dalam sebulan seorang warga miskin harus mengeluarkan Rp 16.450.

Dengan satu istri dan dua anak, RTM paling kurang membelanjakan Rp 65.800 per bulan! Dengan demikian BLT sebesar Rp 100 ribu, hanya cukup memenuhi kebutuhan beras warga miskin selama 20 hari. Sedangkan dana beli beras untuk sepuluh hari sisanya harus ditanggung sendiri oleh RTM bersangkutan. Itu berarti semakin tinggi kualitas beras yang dimakan warga miskin, dana BLT semakin cepat habis.

Itu hanya untuk beras. Bagaimana jika ditambah kebutuhan lain? Konsumsi gula setara 1,25 kg/bulan, minyak goreng 4 kg/bulan, minyak tanah 3,4 liter/bulan/kapita atau rumah tangga sePublish Postbesar 1,3 liter/hari. Hitung sendiri berapa duit yang harus dirogoh si miskin, bahkan seandainya pun konsumsi mereka hanya dua pertiga rerata nasional. Sungguh mencekik leher!

Munarwanlah pemenang dalam pertarungan melawan negara (pemerintah)

10/06/2008 12:04

Luar biasa! Munarman mendadak sontak jadi pahlawan, setelah sebelumnya ia dinilai sebagai pecundang karena membiarkan anak buahnya ditangkap polisi sementara ia menghilang.

Inilah drama penobatan kepahlawanan Munarman itu: hanya dalam hitungan jam setelah Menteri Agama mengumumkan pelarangan Ahmadiyah, Munarman muncul di Polda Metro Jaya. Maka, apa boleh buat, saat itu ia langsung dipersepsikan oleh sebagian kalangan sebagai pahlawan yang membuat lahirnya surat keputusan bersama tiga menteri itu. Kepada pers yang mencegatnya, sebelum masuk ke Polda Metro Jaya, Munarman dengan tegas mengatakan, "Saya menepati janji. Saya bukan pengecut." Kata pengecut ia ulangi beberapa kali untuk memberi tekanan.

Apa pun penilaian lawan-lawannya, harus diakui Munarwanlah pemenang dalam pertarungan melawan negara (pemerintah). Lihatlah bagaimana ia menekan pemerintah: "Setelah pemerintah membubarkan Ahmadiyah, baru tangkap saya, Munarman, sarjana hukum." Ia ucapkan tantangannya itu sehari setelah ia memimpin ratusan orang menyerang secara fisik lawan-lawannya di Monas. Apa yang terjadi, polisi gagal menangkapnya sekalipun puluhan anak buahnya sudah ditangkap dan dijadikan tersangka. Eh, ia tiba-tiba menyerahkan diri di Polda setelah pemerintah mengumumkan pelarangan Ahmadiyah.

Ini ironis. Munarman muncul sebagai pahlawan bukan karena kehebatannya, melainkan karena pemerintah sendiri yang membuatnya jadi pahlawan. Semua itu terjadi karena pemerintah yang lemah dan peragu. Lemah karena secara kasat mata kita menyaksikan bagaimana pemerintah (negara) tunduk pada tekanan Munarman dan kelompoknya. Peragu karena masalah Ahmadiyah ini dibahas berlama-lama tanpa satu keputusan yang pada akhirnya toh mereka putuskan juga mengikuti tekanan publik. Pernyataan Presiden bahwa negara tidak boleh kalah, yang ia lontarkan dalam jumpa pers khusus menanggapi kekerasan yang dilakukan Munarman dan kelompoknya, justru memperlihatkan sebaliknya.

Kita mungkin belum masuk kategori sebagai negara gagal, di mana salah satu indikatornya adalah tidak ada jaminan hukum dan ketertiban, tapi negeri ini sudah pasti bisa dikatakan sebagai negara lemah---ya, selemah-lemahnya negara. Pemerintah bisa didikte, lamban, peragu, dan hukum hanya ditegakkan kepada mereka yang tidak punya kelompok atau tidak punya kekuatan politik.

Dalam konteks ini pernyataan Wakil Presiden Jusuf Kalla bahwa pemerintah tidak bisa bekerja dengan fokus karena setiap hari didemo, dikritik, dicaci-maki, dituding dan tentu saja ditekan, menjadi tidak bermakna. "Presiden tidak bisa berpikir karena setiap hari dikasih mike (pengeras suara) ke arah Istana," ujarnya pada suatu acara yang dihadiri kader-kader Golkar.

Bagi kita, soalnya bukan pada apakah ada demo setiap hari di depan Istana Presiden atau tidak, bukan pula apakah lawan-lawan politik pemerintah setiap hari berkoar-koar atau hanya diam, melainkan apakah pemerintah kuat atau tidak, apakah pemerintah bisa menandingi kekuatan lawan atau tidak. Dalam banyak hal, bisa dikatakan, pemerintah kalah dengan kelompok penekan itu.

Francis Fukuyama sudah lama menyarankan bahwa masa di mana kelompok-kelompok penekan di dalam masyarakat makin kuat, pemerintah tidak boleh lemah. Hanya dengan pemerintah yang kuat, demokrasi bisa berjalan.

Rahman Andi Mangussara


Kepala Produksi Berita Liputan 6

Usai acara Tabligh Akbar, Puluhan Tokoh Islam Jenguk Habib Rizieq

Jumat, 06 Juni 2008

Usai tabligh akbar, puluhan tokoh Islam dan ulama langsung berkunjung menuju tempat Habib Rizieq ditahan. Sempat terkumpul uang lima juta

Setelah mengikuti tabligh akbar, puluhan tokoh Islam dan ulama langsung menuju Mapolda Metro Jaya. Sejumlah tokoh Islam dan ulama itu adalah mereka yang tergabung dalam Forum Umat Islam (FUI).

Beberapa diantara mereka adalah Ketua KISDI Ahmad Sumargono, Ketua HTI Ahmad Al Khathat, KH Cholil Ridwan, dan Pimpinan Pondok Pesantren Assafiiyah Abdullah Rasyid Syafi'i.

Sebelum berangkat, peserta tabligh akbar sempat mengumpulkan sumbangan uang sebesar Rp5.005.500.

Uang sebesar itu merupakan sumbangan yang dikumpulkan dari jamaah yang hadir dalam tablig akbar.

"Uang ini dimaksudkan untuk membantu keluarga anggota FPI yang sedang ditahan," jelas kata Pimpinan Pondok Pesantren Assafiiyah Abdullah Rasyid Syafi'i usai tabligh akbar.

Huge US Jobless Rt Rise Takes Fed Hikes Off Table

2008.06.06 14:30:23 =DATA SNAP: Huge US Jobless Rt Rise Takes Fed Hikes Off Table

By Brian Blackstone

Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--The U.S. employment rate posted its sharpest one-month increase in 12 years last month, suggesting U.S. consumers already facing a housing slump and soaring gasoline prices now confront growing pressure from a weakening jobs market.

The data, which included a fifth-straight drop in nonfarm employment, should take financial-market expectations of Federal Reserve rate hikes as soon as this fall off the table.

Nonfarm payrolls, which are calculated by a survey of establishments, declined 49,000 in May, the Labor Department said. The decline was broad based, including manufacturing, construction, retail trade and business services. Payrolls fell 28,000 in April and 88,000 in March. Both were revised to show slightly larger drops.

The unemployment rate, which is calculated using a separate survey of households, jumped 0.5 percentage point to 5.5%, its highest level since October 2004. According to the household survey, employment fell by 285,000 while unemployment rose by 861,000.

"The over-the-month jump in unemployment reflected additional workers who had lost their jobs as well as an upsurge in new and returning jobseekers," said Philip Jones, deputy commissioner of the Bureau of Labor Statistics. He cautioned that the household survey tends to be volatile between April and July due to an inflow of young people into the workforce.

Average hourly earnings increased $0.05, or 0.3%, to $17.94. That was up just 3.5% from a year earlier, suggesting wage costs remain under wraps. Fed officials are counting on the disinflationary slack that comes from a slowing economy to offset higher energy, food and commodity prices and the weak dollar and keep inflation in check.

"Importantly, we see little indication today of the beginnings of a 1970s-style wage-price spiral, in which wages and prices chased each other ever upward," Fed chairman Ben Bernanke said Wednesday, a view supported by Friday's wage data.

Wall Street economists had expected a 60,000 decline in payrolls last month and only a 5.1% unemployment rate, according to a Dow Jones Newswires survey.

After lowering the target fed funds rate at which banks lend money to each other seven times between September and April totaling 3.25 percentage points, officials are expected to hold rates steady at least through the summer.

Prior to release of the May jobs report, financial markets had priced in a rate hike as early as the fall. Wall Street will likely scale back that forecast in light of the jobless-rate rise. However, Fed officials have signaled in recent weeks that they are unlikely to lower rates further even if the economy remains weak.

Labor markets are key to the economic outlook. Until last month, they had maintained enough resilience to support consumer spending despite big drags from the housing slump and soaring energy prices that have sapped demand for big-ticket items. For instance automobile sales have tumbled in response to record-high gasoline prices, but retailers including Wal-Mart Stores Inc. reported solid May sales, which may provide the first evidence that households are spending at least part of their tax rebate checks.

But that could change, and economists worry that households can't withstand the mix of falling employment and soaring prices for food and energy much longer, especially if labor markets weaken.

According to Friday's report, hiring last month in goods-producing industries fell 57,000. Within this group, manufacturing firms cut 26,000 jobs. The sector has lost jobs every month for almost two years.

Construction employment was down by 34,000, the 11th-straight drop.

Service-sector employment rose just 8,000 in May. Business and professional services companies shed 39,000 jobs, and the financial sector lost 1,000. Retail trade shed 27,100 payrolls, the sixth-straight decline.

Temporary employment, which economists consider a leading indicator for future job trends, fell by 30,000.

Continuing a recent trend, job gains were concentrated in personal services, which tend to be more labor intensive than manufacturing and other services. Education and health services employment rose 54,000. Leisure and hospitality businesses created 12,000 new jobs. The government added 17,000 jobs.

The average workweek was unchanged at 33.7 hours. A separate index of aggregate weekly hours fell slightly.

-By Brian Blackstone; Dow Jones Newswires; 202-828-3397; brian.blackstone@dowjones.com

(END) Dow Jones Newswires

June 06, 2008 08:30 ET (12:30 GMT)

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