The US economy lost 49,000 net jobs in May and the official unemployment rate shot up by half a percentage point in the sharpest month-to-month increase since 1986, according to figures released Friday by the Labor Department. Oil prices rocketed upwards the same day, posting an increase of more than $10 a barrel.

The steep jump in unemployment — from 5.0 to 5.5 percent — came as a surprise to analysts, who had been predicting an increase rise of only 0.1 percent. May’s net payroll reduction followed a drop of 28,000 jobs in April, and was the fifth consecutive monthly fall. Payrolls have fallen by 324,000 since the year began.

Factory payrolls were reduced by 26,000 last month, after a fall of 49,000 jobs in April,. The overall reduction in manufacturing jobs will be exacerbated by job cuts at General Motors, where most of the 19,000 workers who took a recent buyout package are scheduled to stop working by July 1.

The housing and financial downturns also took a toll on employment figures; housing contraction payrolls fell by 34,000, after a drop of 52,000 in April. The service sector lost 8,000 jobs, and retail dropped by 27,000 jobs, while a further 1,000 jobs were lost in the finance. These figures correlate with the latest consumer confidence numbers, which dropped to their lowest level in 15 years. Consumer spending growth likewise reached its lowest level since the 2001 recession.

There have been similar rises in long-term workforce reduction announcements, with the firm Challenger, Gray & Christmas recently reporting that 100,000 job cuts were announced in May, 17 percent higher than the same month in 2007. A number of major US airlines announced significant cuts this week; most recently Continental Airlines, which said Thursday that it would cut 3,000 jobs, or seven percent of its workforce.

The steady increase in unemployment and fall in payrolls underscores the possibility of a severe US recession materializing in the coming months — an outcome that certain analysts had of late been discounting — and complicates problems for the Federal Reserve, which this week suggested that it might raise rates to shore up the dollar and limit US exposure to soaring commodities prices.

Here it comes….here it comes……the Admin’s 19th nervous breakdown…..