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Price of Oil Spikes; Unemployment Rate Surges to 5.5 Percent; St. Louis Gets Tornado Warning; New Bush Cabinet Member Sworn-In
Aired June 06, 2008 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: -- to keep their homes by giving the FHA greater flexibility and offer refinancing options. We're also helping to bring together what's now called the Hope Now alliance by working together, participants in the mortgage industry have helped more than 1.5 million families stay in their homes. Hope Now is working but we've got more to do. Yesterday we learned that the foreclosure rates continue to rise in the first quarter. So Steve will work with Democrats and Republicans in Congress to address this challenge. We need to pass legislation to reform Fannie Mae and Freddie Mac. We need to pass legislation to modernize the federal housing administration and allow state housing agencies to issue tax-free bonds to help homeowners refinance their mortgages.
By taking these steps, we'll help more responsible homeowners weather this rough patch and at the same time strengthen the dream of home ownership for generations to come. I've got confidence that we're going to meet these challenges. And I've got confidence in the people who work in this department. I appreciate what you do every day to expand the dream of home ownership. I thank you for your efforts to provide low-income Americans with access to affordable housing. You work hard to make sure our communities are more vibrant and hopeful. The United States is fortunate to have such devoted public services departments.
I'm grateful for your service. You're going to have a worthy leader in Steve Preston. I thank the Senate for confirming Steve as your new secretary. And now I ask the Senate to confirm the three remaining HUD nominees to help him lead this department. Steve, I appreciate you stepping forward to serve your country once again, I congratulate you and now I ask my chief of staff Josh Bolten to administer the oath of office.
UNIDENTIFIED MALE: I Steve Preston ...
STEVEN PRESTON, HOUSING & URBAN DEVELOPMENT SECY.: I Steve Preston ...
UNIDENTIFIED MALE: ... do solemnly swear ...
PRESTON: ... do solemnly swear ...
UNIDENTIFIED MALE: ... that I will support and defend ...
PRESTON: ... that I will support and defend ...
UNIDENTIFIED MALE: ... the Constitution of the United States ...
PRESTON: ... the Constitution of the United States ...
UNIDENTIFIED MALE: ... against all enemies, foreign and domestic.
PRESTON: ... against all enemies foreign and domestic.
UNIDENTIFIED MALE: That I will bear true faith and allegiance to the same ...
PRESTON: That I will bear true faith and allegiance to the same.
UNIDENTIFIED MALE: That I take this obligation freely ...
PRESTON: That I take this obligation freely ...
UNIDENTIFIED MALE: ... without any mental reservation or purpose of evasion.
PRESTON: ... without any mental reservation or purpose of evasion.
UNIDENTIFIED MALE: And that I will well and faithfully discharge ...
PRESTON: And that I will well and faithfully discharge ...
UNIDENTIFIED MALE: ... the duties of the office on which I am about to enter.
PRESTON: ... the duties of the office on which I am about to enter.
UNIDENTIFIED MALE: So help me God.
PRESTON: So help me God.
UNIDENTIFIED MALE: Congratulations (INAUDIBLE)
(APPLAUSE)
PRESTON: Thank you very much. Thank you very much.
Mr. President, chief of staff Bolten, Molly, my children, my parents, current and former members of the cabinet, thank you for coming. My new partners at HUD, my friends and -- and the many other distinguished guests here, thank you for being here today. This is truly very humbling to see you all here to celebrate this event. It is a profound privilege to serve our country as the secretary of urban housing and development and to be a voice for the people that we serve.
Thank you, Mr. President for that confidence, for that trust. I also want to thank Senators Dodd and Shelby for their role in expediting the nomination process. Ladies and gentlemen, it's appropriate that we gather here in this building, it's named for Robert C. Weaver, he was the first secretary for HUD. And Dr. Weaver cautioned against treating people like statistics or data.
In fact, he asked instead that we look behind the data to see the values and the concerns and the hopes and the lives of the people that we all serve. We assist the homeless find shelter here at HUD.
We help provide millions of Americans with affordable and public housing. Families who want to buy a home often turn to us and increasingly those who are currently in homes come to us to keep them. We know that home ownership can be a source of pride, it can be a place to grow up and grow old together, it can be a source for wealth creation, and it is a source of -- it is a stake in our communities and also at HUD we have a role of building and rebuilding many of those communities.
At the moment, there are difficulties in the housing market. And this is a decisive moment in our nation's economic history. HUD will be central to restoring stability in our markets and in the lives of many Americans. In fact, just in the last year, thanks to changes made by you, Mr. President, FHA is increasingly a pathway for hundreds of thousands of families to a more affordable, secure mortgage. And thank you.
BRIANNA KEILAR, CNN ANCHOR: That is Steven Preston, the newest member of President Bush's cabinet, he was just sworn in as the secretary of Housing and Urban Development. So why is this guy so important? Well, this is the man who will be representing the White House, who probably will be representing the White House when they're in negotiations in Congress to deal with both the subprime lending crisis as well as the suffering housing market. So that is really the face of the White House most likely for these negotiations.
We heard President Bush say he's really the guy for this job. He came from the Small Business Administration where he headed up that administration there, and we also heard President Bush talk about unemployment numbers. New numbers that we saw today, unemployment jumping, it was 5 percent in April, we just found out today it went to 5.5 percent in May. That's much higher than was expected. They only expected it to go up about a tenth of a percentage point obviously it went up much higher. Don?
DON LEMON, CNN ANCHOR: All right. More now on the Bush administration, also Brianna the economy. CNN White House correspondent Ed Henry standing by and listening to that.
Ed, you heard the president touch on the economy as well as he was making that announcement.
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: That's right, Don.
I mean there's a little bit of housekeeping, obviously, literally getting a new cabinet secretary Al Jackson, the former housing secretary left because of scandal. The president, as Brianna was noting wants to have a tough negotiator, someone he can trust on Capitol Hill. There's a lot of housing reform legislation to deal with this crisis, but more broadly the second point of today for the president is trying to reassure Americans these new jobs numbers as well as the credit crunch obviously worrying a lot of people.
And the president realizes that. But he will still not use the word recession. You heard him talk about turbulence in housing. He said slow growth overall, he was mocked a little bit today by Democrat Rahm Emanuel on Capitol Hill saying that for most Americans right now, this is a crisis, but for the president, it's just a slowdown. So you can feel the political pressure here on the president from Democrats on Capitol Hill to do more to deal with the economy.
The president himself noted that those stimulus checks are in the mail, now over $50 billion worth of tax rebate checks have gone out. The president said it may be working. I thought it was interesting there, something to pay attention to. He sort of hedged on whether it's working or not. He said specifically it may be working.
We've heard a lot of anecdotal evidence that some people may be spending those tax rebate checks on high gas prices, on high food prices, they may be paying off credit card debt and they may not actually be spending new money, spending and going out and buying new things and stimulating the economy as the president hoped.
That's obviously something he's going to pay attention to, but also Democrats on the hill. They will face political pressure as well if this stimulus doesn't actually stimulate the economy. So a lot of people in Washington paying very close attention to those economic numbers -- Don.
LEMON: All right, Ed Henry, thank you. We'll continue to monitor that. If news comes out of that, we'll bring it back to you right here in the CNN NEWSROOM.
Thanks, Ed again.
KEILAR: Oil is soaring really like we have never seen it soar before. The stock market on its way down. Way more people are out of work. Here to sort out the gloom and doom, Susan Lisovicz at the New York Stock Exchange.
It's so unfortunate to introduce you that way, Susan. I know that on "AMERICAN MORNING" I heard them call Ali Velshi the prophet of doom. I'm not going to call you that, but it's not great news.
SUSAN LISOVICZ, CNN CORRESPONDENT: Yes, I'm kind of used to it at this point. And believe me, don't shoot the messenger. The president was just talking a few minutes ago saying that we're beginning to see signs that the economic stimulus plan is working. We were talking about that yesterday, better than expected numbers in the month of May for some retailers, especially discounters from those stimulus checks. But guess what, we're still dealing with the shrinking job market and all-time highs for oil.
For the job market, it is the fifth month in a row that the world's largest economy has lost jobs. The Labor Department says employers shed 49,000 jobs last month, which brings the total for the year close to 325,000. Meanwhile the unemployment rate, as you were talking about Brianna, surged by the largest amount in 22 years jumping from 5 percent in April to 5.5 percent last month. A huge jump. And of course, if we're talking about huge jumps, we have to talk about oil. At an all-time high. Big jump, nearly $9 right now, close to $136.50 reaching nearly $138 earlier in the session. Supply and demand, always an issue.
One analyst is forecasting $150 oil here by the Fourth of July. Then I guess it's no surprise that we're seeing a blood bath when it comes to stock market. The Dow industrials, which gained more than 200 points yesterday has more than erased that, down 312 points, or 2.5 percent. The NASDAQ and the S&P 500 each also down more than 2 percent -- Brianna?
KEILAR: Oh, it's so -- it's so unfortunate. But the economy, this is the major issue for voters. Let's talk now about the two presumptive presidential candidates. What are they putting out there as their plan for dealing with this?
LISOVICZ: First of all, they're quick to talk about it that's for sure as was the president, as you noted, both Barack Obama and John McCain quick to react to the jobs report, quick to say they had the best solution. Senator Obama says the employment report is deeply troubling and a reminder that families are bearing the brunt of the failed Bush economic policies that John McCain wants to continue.
As for Senator McCain, he says Americans are hurting and immediate tax and housing relief is needed. We know we'll hear a lot more on that subject from both of them. We'll also hear about oil. In the next hour, I'll have the settlement price on oil. How high can it go? We'll be watching that number very closely, Brianna.
Back to you.
KEILAR: Oh, my goodness.
OK, Susan Lisovicz. Thank you so much. Maybe people have heard so much from us, Susan, about the economy, we want to hear from them, of course, in light of today's sobering unemployment numbers. We want to know what the job market is like for you. Just go to ireport.com. You can look for the box that asks looking for work, then you can share your story with us.
LEMON: Absolutely.
And bridging the divide, Hillary Clinton gets ready to throw her full support behind Barack Obama days after he clinched the Democratic nomination. Clinton is scheduled to officially drop out of the race tomorrow at an event in Washington. Ahead of that, a face to face meeting between Obama and Clinton to settle their differences, and talk about how to win in November. The presumptive Democratic nominee and his former rival met in Washington last night at Senator Dianne Feinstein's home. They issued a joint statement calling their talks productive, and Feinstein said they were laughing after the meeting. As for the two Democrats, after they make peace, John McCain is campaigning in a battleground state. The presumptive Republican nominee is in Florida where he is touring the Everglades and meeting with the media.
So what's the scoop on that meeting last night between Barack Obama and Hillary Clinton?
Here's CNN's Suzanne Malveaux.
(BEGIN VIDEOTAPE)
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT (on camera): Senator Dianne Feinstein is spilling the beans this morning, because she was the host of that secret face to face meeting. It took place at her house in her living room and she tells our own Ted Barrett on the Hill today that she sat the two of them down in comfortable chairs, facing one another, served them water and then left the room. It was just the two of them as their campaign staff and secret service waited outside. She said they talked for about an hour and called her when it was over and said they were laughing, they got along very well.
Feinstein, who is a dear friend of Hillary Clinton, said the reason they wanted to meet privately was because this was a deeply personal time. She says this was a time to sort out their feelings, there was a lot of decompression. A nerve endings that need to come together. The secret meeting took place at 9:00 last night. This was after the Obama campaign played a very effective cat-and-mouse game with the media.
After a campaign rally in Virginia, reporters were put aboard the campaign plane. After the doors were closed, discovered that Obama was not on the plane. A spokesman today said the cloak and dagger approach was necessary.
ROBERT GIBBS, OBAMA CAMPAIGN COMMUNICATIONS DIR.: There was a desire, first of all, to do this in a very private way and in a private location, and obviously it would have been hard to have done that with 100 of our best friends with their video cameras and tape recorders. Again, this was a meeting that both candidates had wanted to do, and both candidates wanted to do in a very private way. And that's, you know, that's what we had to do last night.
MALVEAUX: This was really the first step towards repairing relationships between the two camps. Later today Clinton will have her staff over for dinner at her Washington home, but all eyes are going to be on tomorrow, that is when she publicly goes before her supporters and calls for the party to unite around Barack Obama.
Suzanne Malveaux, CNN, Washington.
(END VIDEOTAPE)
KEILAR: You don't see these guys on your TV screen prognosticating about the presidential race, but maybe you should. Because they've got a whole lot to say about the battle between John McCain and Barack Obama. We'll hear what some Washington cab drivers say about the November election.
LEMON: Speaking of cab drivers, they're worried about gas, right? Oil prices surge again. So will your wallet get even thinner with those higher gas prices? We'll check with our energy desk in New York.
(COMMERCIAL BREAK)
LEMON: So John McCain or Barack Obama. Who is going to win in November?
Our Zain Verjee took to the streets of Washington where cab drivers were more than happy to express their opinion.
(BEGIN VIDEOTAPE)
ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT (on camera): Taxi. Taxi.
UNIDENTIFIED MALE: Somalia, originally.
VERJEE: Taxi.
UNIDENTIFIED MALE: Right here in Washington, D.C.
UNIDENTIFIED MALE: The Ukraine, yes.
VERJEE (voice-over): The United Nations of political pundits back in session.
(on camera): Thank you.
(voice-over): In Washington, all roads lead to one address.
(on camera): I need to get to the White House. Do you know any short cuts?
UNIDENTIFIED MALE: Short cut for?
VERJEE: Getting to the White House.
UNIDENTIFIED MALE: There's no short cuts.
VERJEE: What do your passengers tell you?
UNIDENTIFIED MALE: Well, majority they like Obama.
UNIDENTIFIED MALE: We need change. We need smart leadership for this country.
VERJEE: And that smart leadership is?
UNIDENTIFIED MALE: Obama is the smart leadership. UNIDENTIFIED MALE: He needs more training, how to deal with those guys around the world.
VERJEE (voice-over): On the road, their biggest worry is, guess what?
UNIDENTIFIED MALE: Disgusting to have to pay this much for gas.
VERJEE (on camera): What advice would you give Senator Obama and Senator McCain right now to get into that White House?
UNIDENTIFIED MALE: Well, campaign on issues. That's --
VERJEE: Gas?
UNIDENTIFIED MALE: Yes. Gas -- too hgih.
VERJEE: Do you think that McCain is too old?
UNIDENTIFIED MALE: That's not like main issue to me.
UNIDENTIFIED MALE: If you're in good health, shouldn't matter what your age is.
VERJEE: Is Obama too young?
UNIDENTIFIED MALE: This is the right age. He has full energy.
VERJEE (voice-over): The cabbies are quick to turn the corner.
(on camera): Do you think Hillary should be Senator Obama's VP?
UNIDENTIFIED MALE: That's a good. That's a good ticket, yes.
UNIDENTIFIED MALE: I just think it would be too much friction.
VERJEE (voice-over): Cabbie pundits disagree on the road ahead.
UNIDENTIFIED MALE: You know, there's going to be a lot of different prejudices, you know, come to the floor in this -- in this election. You know? Some are going to be very bitter, some will be very racially divided.
UNIDENTIFIED MALE: A black person that started from zero.
UNIDENTIFIED MALE: This is the flag of the United States of America. This is a great country and I wish all the best.
(END VIDEOTAPE)
VERJEE: One cabbie we spoke to, Don, said that he's actually already worried because he's saying, what's he going to do after the election? There's just not going to be this kind of excitement.
LEMON: That was a great idea, Zain. I always chat the cabbies up, because they really have their ear to the street. Right, they know exactly what's going on.
VERJEE: Right.
LEMON: So what struck you the most with all these cabbies?
VERJEE: Well just that. I mean they were so plugged in. Always reading the papers, talking to very interesting political passengers or just regular people that have different points of view. But one thing too, was that these guys are really smart guys. You know they have PhDs, they're doctors, lawyers from other countries. So they really did have a good solid background and they were articulating their thoughts incredibly well.
The other thing that really stood out was whether they supported Senator McCain or Senator Obama, they were saying unanimously that the United States is the country that offers this kind of opportunity. So they're also full of praise for the whole Democratic process.
LEMON: It's always amazing, because people who are from other countries and international people oftentimes they recognize CNN people more than people here domestically and they ask these really interesting questions about world affairs.
VERJEE: Right.
LEMON: So I guess was it fun? That's the next question.
VERJEE: Well, it got me outside on a beautiful day, so yes, it was lots of fun and I just traipsed around town and learned a lot. It was great. I ate hot dogs and mint chocolate chip ice cream, but it was just really interesting just to talk to people in cabs and see what the buzz really is and the buzz overall was Obama, Obama.
LEMON: Absolutely. OK, Zain Verjee, thank you, great story, you did a great job.
VERJEE: Thanks.
KEILAR: You know most people expected the U.S. unemployment rate to be up in May, but when the number came out this morning, the increase was really much bigger than predicted. So what is behind this number in the jobless rate?
Let's ask labor secretary Elaine Chao. She's joining us now from our New York bureau.
Thank you so much Secretary Chao for being with us.
ELAINE CHAO, SECRETARY OF LABOR: Thanks for having me.
KEILAR: So unemployment 5 percent in April, went up to 5.5 percent in May, more than expected. The sectors are really seeing it, in construction, manufacturing, retail trade, those folks who do temporary work. What does the Bush administration want to tell those people who are really feeling the pain here? CHAO: We have a nationwide network of 3,500, what's called local One-Stop Career Centers and their role is to help people who are out of work to find new jobs. They're really staffed by caring and compassionate professionals. For people who are interested, they should call a toll free number, it's 1-877-USA-JOBS. Obviously we're very concerned about the economic situation, as you've heard from President Bush. And we've sent out about $50 billion in stimulus payments to about 60 million Americans, and we hope that these checks would reach everyone, because they went out around May, and we expect that the stimulus impact on the economy will occur around summertime.
What we found really interesting with the increase in the unemployment rate was that we saw a larger than usual number of new entrants into the workforce. So a majority of these new entrants include recent graduates and the participation rate in the labor force is about 66.2, which is higher than usual, obviously.
KEILAR: Secretary, I mean, it is nice to concentrate on a bright spot there, but the net really was a loss. And this unemployment --
CHAO: Yes, it was. We're not just focusing on the bright side, but I want to make sure people understand the whole picture, too.
KEILAR: But this unemployment rate jump, I mean this was the biggest monthly jump in more than two decades. And this is not a sign that we may be in a recession?
CHAO: No, I don't think so. Because the other indicators, which give, indications as to the state of our economy, are not so dire. After all, GDP growth is .9 of 1 percent. It's still positive. There are other indicators that show that our economy, while weaker than we would like, is not really in a recession yet. The loss of jobs, actually, has not been as great as usual past recessions. For example, 125,000 jobs are usually the loss numbers that we see. This month it was about 49,000 so I'm still optimistic.
KEILAR: All right, labor secretary Elaine Chao, thank you so much for joining us.
CHAO: Thank you.
LEMON: We know the price of oil has a trickle down effect to home heating oil, what you put in your car, how much you're going to pay for that. Well guess what, oil is trading at a record high, a record high. We're going to go back to our business correspondent Ali Velshi with this breaking news coming up.
(COMMERCIAL BREAK)
LEMON: We have breaking news into the CNN NEWSROOM. Let's take a look now at the big board. The Dow is tanking and the price of oil is going the other way and it's happening fast. Senior business correspondent Ali Velshi on top of it.
Ali, take it away. ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: First thing I want to tell you Don, take whatever you've got on the bottom of the screen out, we cannot keep pace with the movement on the oil market right now. I have to tell you, I've never seen a day like this, in fact nobody has seen a day like this. Oil now trading at $138.96 a barrel. This is the most oil has ever gone up in a day. It closed yesterday at $127.79. So we're up way more than $10 a barrel. We've never seen this kind of trading.
Now, there's about 2 and a half minutes left in the trading of oil right now, and I'm just looking at the screen, I can't even provide you with fast enough information. Now what's happening is as oil has spiked, you are seeing the Dow now off 340 points. That's not even the lowest it's been. This is the struggle that goes on at the end of the day now. As the oil traders are wrapping things -- OK we've now just crossed $139 a barrel. Again, this is uncharted territory.
Let me tell you what's happened here, Don. We've had a few things that have developed today, first of all, the U.S. dollar has dropped precipitously yesterday. That typically causes the price of oil to go up. Number two, we had an Israeli official commenting on the fact that an attack on Iran is probably unavoidable. Those are the words he used, "unavoidable." That caused concerns about oil. Then we have a further situation where an analyst at Morgan Stanley who follows the oil industry said that we will hit $150 a barrel by July 4th.
You take all of those things together, you add in a potential strike at oil facilities in Nigeria that could happen and you've got a lot of upward pressure on the price of oil. So we are now at $139 a barrel for a price of oil. We've got a drop of 340 points on the New York Stock Exchange, and we have had for the first day in 30 days, a break and an increase in the price of gas. In fact, we had a decrease. That's going to be very short lived if we see this kind of thing continue. Because oil is directly tied to the price of gas.
LEMON: I want to ask you real quick. You said we've got about a minute left before you stop trading oil?
VELSHI: Forty-five seconds.
LEMON: Forty-five seconds -- down -- it's up to $139 a barrel.
VELSHI: That's right.
LEMON: That's the highest ever. We're going to stay with this for a little bit Ali. I also want to talk to you about, this is the highest intraday.
VELSHI: This is the highest everything.
LEMON: No, I'm talking about the Dow, going down, intraday. We're going to stick to the Dow now. This is the second, I guess, lowest the Dow has dropped in trade -- VELSHI: In all of this year. We went a big drop on February 5 of about 370 points, but remember we've got an hour and a half to go on the Dow. So who knows what's going to happen there. But with oil trading, oil stops trading at 2:30 eastern, so that bell is going to ring in five seconds. And it continues to settle. So what will happen, if the traders see that something's going on in oil, if it takes a while to settle and it crosses higher than it is, you might still see the Dow go down further. If it looks like we're sort of done with this and we've got everything out of the system for the day, you might see buyers start to come in late in the day on the Dow. That often does happen on these big dips.
People who are professional investors say there's a deal to be had. So we're going to watch both of these things very, very closely. Oil has closed trading now, for the day. It will take 15 minutes to see where the price settled. The current trading price right now, $138.45, or so. It went as high as $139.01. We are going to keep a very, very close eye on this, what's causing it and what effect it's going to have on the price you pay.
LEMON: So it's at -- wow. Somewhere around $139.
So here's the question that everyone is asking.
VELSHI: Unbelievable.
LEMON: What does this mean, if I'm sitting at home and I'm watching Ali Velshi and Don Lemon, what does all of this mean to me?
VELSHI: Well, it means that this trend -- the reason that the car companies decided they're getting out of SUVs and going into small cars. The reason that United and Continental and American are parking their fuel guzzling planes, is that, everybody now who has to purchase oil has got to come to the realization that we're probably going to go higher before we're going to get lower.
So, you have to make decisions, whether it's in your life or your business, to change how you consume oil. Because the prices will not come down to satisfy you. So that's what it means. What it means is, if you were planning on going into solar heating in your house or getting a wind mill in your house, or getting a smaller car, this only reinforces your decision to change the way you live, because these prices are just going higher.
LEMON: And Ali, I can only imagine the reaction on Wall Street.
If we could get Susan Lisovicz up, that would really be helpful, here. But I can only imagine, as we're looking at this. As we look at the Dow being down $313 right now. And we have what, about an hour and a half left in trading?
VELSHI: An hour and a half.
LEMON: So we never know what could happen. It could come back.
VELSHI: Right. It's a double whammy, right. Because the Dow got the bad unemployment report today. The Dow started off the day badly because at 8:30 this morning, we found out that the country's unemployment rate went to 5.5 percent and we lost more than 50 -- 49,000 jobs in May. So we've lost more than 300,000 jobs this year alone, so that's the problem. We've got bad news on the local economy, the U.S. economy front. And we've got bad news on the oil front. And that combining to just upset investors.
LEMON: And Ali, as I'm looking at our CNN money folks sending us e-mails here, it's saying that trading record $139.01 a barrel -- that's a trading record.
VELSHI: That looks where it's headed.
LEMON: Up $11.22 just from yesterday, which was at what, $127.79. Talk to us about that. I mean, that's giant. It usually doesn't jump that fast.
VELSHI: No. We've never seen -- yesterday's number, by the way, may have been the biggest number. It's certainly the biggest number in 25 years for oil to jump more than $5 in a day.
Now, think about this, Don, and we have talked about this. If oil jumped $1 a day, that would be a $365 increase in oil in a year. So that's not even conceivable. So to start talking about $5 and $10 in a day, it is just not the kind of thing that can be sustained. So the bottom line is, at some point this ends. You can't invest in oil thinking it's going to $500 because the world will be a different place. We won't use oil for everything we need if oil goes to those prices.
But for the meantime, if you drive a car and you heat your home with oil or you fly on a plane or you have to refrigerate or build anything, the bottom line is, this kind of price for a barrel of oil affects everything we do. Somebody told me yesterday if you bought it, a truck brought it. Trucks drive diesel in this country. Diesel's up -- pushing up against five bucks a gallon. Farm equipment uses diesel oil. It needs -- they're paying expensive prices. So it works its way into your food. Everything you buy. This is not a matter of whether you invest in oil or you have a gas guzzling car, this is everything we do. This is the life blood of America.
LEMON: Ali Velshi, don't go anywhere.
I want to tell our viewers, oil trading at a new startling record high, a new startling record high. And the second biggest loss, intraday for the Dow as we look at the Dow now, down some 319 points, Susan Lisovicz is at the New York Stock Exchange, we're going to have details on all of this, in the CNN NEWSROOM.
(COMMERCIAL BREAK)
LEMON: Our breaking news into the CNN NEWSROOM today, of course it is the economy, it is issue number one, as we look at the Dow. Down some 331 points here. We're also taking a close look, keeping our eye on crude oil, trading at its highest level ever, $139.01.
Our senior business correspondent, Ali Velshi, is following all of this, he joins us now with the latest.
Ali, disturbing news for investors today, as well as for consumers when you look at the price of oil.
VELSHI: Yes, for those of us -- you know for Susan and for me, when we follow business news a lot, we don't get that disturbed by things on an ongoing basis. But you know, we talk about the highest level ever. We've said that in the past. This is very significant.
Over my shoulder is the barrel. I couldn't even bring it in earlier, Don, because the price of oil was changing so rapidly. As you know, these numbers are ones that I put on, so I couldn't do it fast enough. This is the high that oil hit just moments ago, $139.01. Now, oil finished trading about seven and a half minutes or so ago, but it takes about 20 minutes or so, for us to figure out what the final numbers are. It continues to trade,
I'm looking at, what looks like $138.39. So these are just numbers we've never seen before. Just to give you a sense of this, yesterday, oil settled at $127.79, And most people were reporting that that was the biggest gain they could ever report. NYMEX had never seen a gain like that in a day. That was about $5. Now we've seen a gain of over $10 in one day. This is unprecedented. Now, oil makes up more than three quarters of the price of a gallon of gasoline. So today we had the first day in a month where gas prices went down by, you know, just a fraction of a penny.
LEMON: And Ali, you were talking about this earlier, the dollar's dropped, there's conflict in the Middle East, all of that is affecting this and adding to this potion that's not so good for us.
VELSHI: Right.
LEMON: Will you stand by just for a little bit? Because we're going to get to the New York Stock Exchange.
VELSHI: Yes, sure.
LEMON: If you're looking at the Dow. The Dow, the right hand bottom of your screen there, you see the Dow down 323 points at this time.
Susan Lisovicz, joins us now from the New York Stock Exchange, with reaction from there.
Go ahead, Susan.
LISOVICZ: Well you know Don, I mean, I was standing on the trading floor, and we've seen a lot of big moves in oil. But I have to tell you, when I was standing down there in the last hour, you really started to hear a roar on the trading floor, because it is unprecedented and it is historic and it is very disturbing. Because what you're seeing is a huge jump in energy. Something everybody needs, companies need it, consumers need it, and it's an extra tax, a huge extra tax on everyone, at a time when the economy -- the U.S. economy is already on the ropes. And we got more evidence of that, more graphic evidence of that today, when we got the monthly jobs report for the month of May. We saw the fifth straight month of job losses, but we saw the monthly unemployment rate take a big one-month jump. The biggest monthly jump in 22 years to 5.5 percent. You put those things together, where people are worried about their jobs, where they're seeing the value of their homes decline. And at the same time, gas and energy is rising at a meteoric pace, you're going to see a sell off like we're seeing now. Check it out...
LEMON: And Susan, let's talk about those unemployment numbers that we have been reporting, as well. That factors into this, also.
LISOVICZ: Oh, no question about it.
We talked about it at the closing bell yesterday, Don. We said, this is the number; we're going to look at this. It looks like we're going to have the fifth straight month of job declines. Remember, this is the world's largest economy. There's this old expression -- when the U.S. sneezes, the whole world gets a cold.
There's a reason for that. We're the biggest consuming nation on earth. Everyone is supplying us, everyone wants to sell stuff to us, they want us to vacation in their countries and so on and so forth. It's huge. It affects everyone.
When you're seeing the U.S. economy lose something like 325,000 jobs since the beginning of the year, you're seeing unmistakable sign of a dramatic slowdown. Now, there could be a lot of debate among people much smarter than me whether it's a recession or not a recession; we know it's a slowdown and it's affecting a lot of people. Again, you put those things together where you're seeing inflation in so many ways that's coming from oil, and then you're seeing the economy slow down, whether it's job losses, declining home prices, and it's a mess.
And it's playing out today in a big selloff -- the biggest selloff we've seen since February.
LEMON: And you know, Ali, feel free to jump here in real quick. When we were just listening to Elaine Chao, Brianna Keilar, my colleague here, was interviewing her and she said, I don't think we're in a recession. It's not pointing to a recession --
VELSHI: It's ridiculous --
LEMON: When you see the numbers, the ups and downs now that we're looking at now, how can you say that?
VELSHI: Ridiculous. She was sitting across the row (ph) from me, it was your interview I couldn't get involved in saying it. But I just wish they wouldn't say. President Bush said something earlier about how the unemployment rate today, the increase, was because a whole bunch of teenagers have joined the workforce; that's the point -- 100,000 people join the working age working force in the United States every month. If we don't create 100,000 jobs every month, we're not doing the right thing. So when you're losing 28,000 a month, 50,000 a month, 70,000 a month, 80,000 a month, we've lost 300,000 jobs, Don, since the beginning of January. I do not understand how this administration can sit there and not identify this for the that problem it is. The is a crisis.
The jobs issue is a crisis. The housing market is a crisis. It took them and the Fed a long time to come around to that one too. I wish at least at this point that the Department of Labor would sit there and say the jobs issue is a crisis. Because otherwise, Don, you and Susan and I will be talking about this a year saying, I wonder why they didn't do that a year ago.
LEMON: Susan, I got 10 seconds. Can you do it for me in 10 seconds?
LISOVICZ: Well you know the National Bureau of Economic Research actually told CNN today that it believes we're on the precipice of a recession, but not there because the GDP is still growing. Having said that, it barely got a -- barely got a pulse. But that is -- for most people, it's a downright depression when you can't afford gas and when the value of your home is going down. I mean, who cares what the academics call it. They're in distress.
LEMON: Susan Lisovicz at the New York Stock Exchange.
Ali Velshi keeping watch for us in New York.
We are -- in case you're just tuning in, we're looking at some startling news coming out of Wall Street today. The Dow is tanking. There's no other way to put it -- 330 points almost down. And oil is trading at a startling all-time high. We're going to continue to cover this story -- Brianna.
KEILAR: Actually, gas prices fell for the first time in a month, but we just heard Ali say that oil accounts for three-quarters the price of a gallon of gasoline. So we're talking about this intraday high for oil, which is really an understatement. That means the gas prices can't be far behind.
Let's get some input now from CNNMoney.com's Poppy Harlow. She's at our energy fix desk in New York.
Poppy, what can you tell us?
POPPY HARLOW, CNNMONEY.COM: Hey, Brianna.
Yes, we're watching this very closely. Astounding numbers. I think all of us that cover the markets are really shocked, as well as our viewers. Ali and Susan explained it very well.
I want to get into what this means for you. What we've seen over the past two days is oil surge 13 percent. If that happens to gas prices, you're going to see a 50 cent spike in the record-high gas prices that we're already dealing with. The price of gas fell .3 percent overnight, but Ali is exactly right -- that's not going to last. Just wait until what you see tomorrow morning.
Let's get into the numbers. Morgan Stanley analysts coming out today saying they think the price of oil will reach $150 by the 4th of July. So pretty astounding numbers here.
So what is causing this? It's not just a rise in demand. Of course we're seeing increased demand from Asia. Another factor, today an Israeli official quoted as saying an attack in Iran's nuclear site looks, "unavoidable." So some supply concerns there as well. That is also combined with people pulling out of the market.
The Dow down 330. People pulling out of equities, jumping into commodities like oil. That is exactly what's going on here. So pretty astounding stuff, Brianna. The energy fix desk, we want to help you out. The fix for this is not very easy.
Let's go into some really other interesting facts here. A new report out from the Paris-based International Energy Agency says in order to combat this global warming, all of this demand, we're going to need an investment of $45 trillion. They want to see that money go towards 1,400 new nuclear plants by 2050, 17,000 wind turbines. So as you can see they're calling for alternative sources of energy. You can bet that is going to get a lot more attention as we see crude oil topping $139 a barrel.
It is really weighing on the consumers out there. We'll have to see what happens to gas, Brianna.
KEILAR: So we call it the energy fix desk, of course this is going to hit all of us in our wallets. We want to talk about how to solve the problem. And if we can't solve it, at least how we can minimize it, Poppy.
HARLOW: Yes, that's exactly right.
It goes right down to the consumer. This is not the gas station owners that are making money off of this record oil; it is definitely the consumer that is feeling the pinch trying to fill up the tank. And it's just rough times out there. Of course we're following it all for you here.
But you see the stocks down dramatically. What's interesting -- the market rose yesterday when we saw the surge yesterday in oil, which we thought was the highest we had ever seen. Well it doubled today. Oil almost settling now about $139, up $11 in the session. I believe the jump taking place this afternoon, Brianna.
KEILAR: All right. Poppy Harlow for us at the energy fix desk in New York.
We've got this oil intraday high. I want to call it like a high- high-high. That's really an understatement just to call it a high. We're watching the Dow tank. This -- big day -- second-biggest drop this year.
LEMON: Yes, we're going to continue to follow this. We've got all of our money people, CNNMoney.com people, as well as Ali Velshi, Susan Lisovicz and Poppy Harlow is at the energy fix desk.
What does this mean to you? It is startling numbers -- these are startling numbers coming from Wall Street today and it affects your wall let. Details to come here in the CNN NEWSROOM.
(COMMERCIAL BREAK)
KEILAR: We're focused on the economy right here in the CNN NEWSROOM, but we also are watching severe weather. Let's get now to Chad Myers.
What is this, a tornado warning right, Chad?
CHAD MYERS, CNN METEOROLOGIST: Yes, for the southern and southwestern St. Louis, Missouri suburbs. This is now kind of a serious situation, because we're getting into a populated area with this cell. I'm going to -- there's two cells on there. One south of Rolla (ph), which has been spinning, has a tornado warning on it, but not nearly as impressive as the one I'm watching here near Piney Park, just south of St. Clair. Kind of paralleling the I-44 corridor there, on up into St. Louis.
There is the spin right there. It is spinning and has been spinning for about 20 minutes. Now the spin is significant enough that -- well, there you go. They're in the southern suburbs of St. Louis. And I'll drag St. Louis right into the mix. There's the town -- and the city of St. Louis. This is going to be a tornado warning for you.
Eventually St. Louis right now, it's just in your suburbs, but we will watch it for you. But nothing on the ground just yet indicated by Doppler, but there's a lot of spin with this storm and we'll keep you up to date as the day goes on.
KEILAR: Yes, a whole lot going on here in the CNN NEWSROOM.
Chad, we'll keep our eye on that severe weather.
In the meantime, the Dow is tanking, oil is soaring.
Don, I know we have more on that.
LEMON: Wall Street is on a roller coaster ride today. Depending on what you look at, there are highs and lows. Highs when it comes to oil prices and lows when it comes to the Dow. We're going to get now to our Susan Lisovicz and Ali Velshi watching it all.
Susan is at the New York Stock Exchange.
Ali Velshi, as we can see there, Ali getting information now on his BlackBerry.
Ali, what did you learn? Learn anything new?
VELSHI: Well, here's what we've got. We've got oil traded at as high as $139.01 today. It is settling in now, we're still getting the final numbers, but it's very close to $139. That is an increase of more than $11 from yesterday. That's the biggest increase we've ever, ever seen. This is the highest number we've ever seen on the price of oil.
Why? Well there are a few factors. No. 1, the dollar is lower. The European Central Bank said yesterday that it will increase its interest rates in the near future. That usually means that money goes into European currencies, the euro, the dollar drops.
And an Israeli official made a comment today that conflict with Iran is unavoidable. That -- of course Iran controls one quarter of the world's oil through the Straight of Hormuz.
Morgan Stanley's oil analysts said that oil will hit $150 by July 4th, mainly, he said that Asian oil demand has been growing much faster than expected.
So those four things taken together, plus news that there may be a strike in the oil fields of Nigeria. Nigeria is one of the biggest oil suppliers in the world. Those things all came together and caused a spike in the price of oil, which we will see very soon in the price of gasoline because unfortunately, that's the way it works.
LEMON: Susan, go ahead.
LISOVICZ: Well -- while we see oil with these breathtaking moves, Don and Ali, what we're seeing is that the U.S. economy continues to weaken. And that's why we're seeing such a blood bath on Wall Street today. Very important report that comes out once a month is the jobs report. It doesn't get more basic than that. Every month this year we've seen a decline, including for the month of May.
Actually, the actual job loss was a little bit better. It wasn't as bad as investors expected. But the unemployment rate was a huge -- took a huge jump to 5.5 percent. That's the biggest monthly jump in 22 years.
So you're getting a one-two punch essentially today. You're seeing a huge tax on the American consumer, and on corporate America. Because when it comes to energy, when it comes to oil, that's really the insulin for an industrialized economy. Everybody wants it. And then you're seeing this great economy of ours continue to slow down.
Now there's a raging debate as to whether the economy is in a recession or not. What we can say unequivocally is that people are hurting and you're seeing it play out dramatically on Wall Street.
LEMON: Yes. And as we said, we just heard from Elaine Chao, Secretary of Labor, and she said, she doesn't think that we're in a recession or headed towards a recession. I don't know if I'm paraphrasing correctly, but absolutely saying we're not in a recession.
But when you look at the numbers and you look at today, the unemployment numbers, what's happening with the Dow, what's happening with oil, it's kind of hard to deny if we're not in a recession, we're at least teetering somewhere around one.
LISOVICZ: Well -- no question. And I think the argument is that GDP, which is the mother of all economic reports, still shows growth. It is anemic growth. But it may be just a matter of semantics. A lot of people are hurting and it's a downright crisis when it comes to the housing market, when it comes to the credit market and when it comes to the financial market.
None of those areas are healthy yet. And until they get healthy, and until oil becomes more stable, that's a big if, then you're going to see -- you're going to see things settle down. This is a cycle. There are a lot of folks that say it will be better in the second half. All the intervention by the Fed will start to filter through, things will be better. But right now, there's a lot of pain.
LEMON: Susan, I've got to ask you, you're right there with it, if you could turn around, I know when this came out when the Dow started to go down and when they heard about the oil prices, you said you heard gasps, and you were actually on the floor.
LISOVICZ: I heard yelling.
LEMON: What's the reaction there now?
LISOVICZ: It's kind of a low roar. You just -- you become -- we've become accustomed to big jumps -- $3, $2, $4, you see --
LEMON: Ten dollars.
LISOVICZ: But when it -- when it jumped to $9, you started to hear yelling on the floor, like this was really just sort of a -- just shocking, just shocking. And you know how it's going to play out. It's not good.
LEMON: Yes. All right.
Susan Lisovicz, thank you very much.
LISOVICZ: You're welcome.
LEMON: Don't go anywhere, but we're going to bring Ali back in.
Ali, I know you have your barrel there, right?. And at one point, we had the numbers up on the bottom of the screen, it was $137, $138, and you said, just take those numbers down --
VELSHI: We couldn't keep up.
LEMON: -- because we can't keep up with it.
VELSHI: Couldn't keep up with it.
$139.01 is where oil hit. It then settled, by the way, at $138.54. We just got that number confirmed moments ago. But let me tell you again, more disturbing news, I've got live numbers coming in to me right now. It's back up to $139. So immediately when oil settles, the trading continues.
Oil never stops trading. It's just always trading. So that's a major problem.
The other thing, too, the point that you and Susan were discussing, oil is up 43 percent since the beginning of this year. It's double where it was a year ago. We have inflation in food and everything else we look at. We've still got a housing crisis. We've got 324,000 people who do not have a job since the beginning of this year. We have an unemployment rate that has soared from 4.5 percent to 5.5 percent a year.
This is a day that I don't care to know the definition of the word recession because it hurts my head to think that I know what a recession is, and that there are people in this country who are arguing the fact that we're not in a recession.
LEMON: And it's hurting --
VELSHI: Tell that to the people who lost -- those 324,000 people. Tell that to Americans filling up their gas tank. Tell that to people who can't sell their home or who are getting it foreclosed. This is a crisis. Let's call it crisis. Let's forget recession, and say it's a crisis. But it needs to be solved.
LEMON: Well it's a recession in your wallet --
VELSHI: Yes, it hurts you.
LEMON: -- whatever way it goes.
And I just want to remind our viewers, you're looking at -- right there, over Ali's chest, that's the Dow. And we're looking at that. We're going to keep an eye on it because the Dow is down 336 points. It is the second-biggest loss of intraday trading so far this year.
And we're going to keep Ali, talk to Ali for a little bit, as well as Susan Lisovicz.
My partner wants to jump in here -- Brianna.
KEILAR: Yes, Ali, the bottom line, when people see that oil is jumping this much, they want to know what is going to happen when they're filling up their gas tank. It's time -- it's summertime. People want to take a drive, they want to go on vacation and obviously we've already reached that tipping point where people start laying off doing that.
VELSHI: And we've seen it. We saw that when oil was $3.50 as a national average, Ford and G.M. both said truck sales fell off a cliff. We saw those numbers in April, compared to a year ago. Then we saw May's auto sale numbers, same thing -- 40 percent drops across the board in truck and SUV sales.
So guess what? Americans are smartening up to the fact that we're about $4 a gallon national average, it's going to go higher from there. We know that in the short term. You can't wait for this problem to get solved. You can't wait for somebody to either investigate or decide they don't want to invest in oil. You're going to have to make changes to how you live. Those short term changes are selling your car, or trading it in for something smaller or carpooling, or something like that.
The longer term changes are the problem -- how you heat your house, how far you live from work, how you consume things. This is -- what your habits are. We have been hearing from people that they're changing the ways they do things. They make a list of all the errands they need to run, and they run it once, on a Saturday. We're hearing all sorts of different things. Home entertainment will become a bigger deal when people can't afford to go out as much as they do.
This is about Americans' lifestyle changing. The way we drive, the way we travel, where we go to, what we eat, and how we develop our entertainment and our work lives. This is -- if you are watching this and you want to know what to do, don't be surprised by this and don't wait for it to come down. Just change the way you live and take control of it, because this is going to take control of us. We're governed by oil in this country.
KEILAR: But there are some people -- they don't have a choice. Maybe they have the car they have, it's actually -- they're going to lose money if they trade in right now for a smaller car, they have a lease or what have you.
What can they expect in terms of gas prices? Is it too early to determine that?
VELSHI: I think it's fair -- we can take pretty educated guesses on the way things go.
First of all, the price of gasoline, about 75 percent of it is made up from the price of oil. There's usually a 10 day to 14 day lag between spikes in oil and spikes in gas. So we know that oil last spiked on May 22. If you add a few weeks on to that, and guess what you've got? You've got today -- the first day that oil didn't go up in price in 30 days.
So we know, we can calculate this. So you know that -- mark my my words. Mark this down. In 10 to 14 days, you are going to see continued records in the price of gasoline. It's going to go that way. That's the way it goes. The only thing that's going to change that is how we consume gas, if we consume less gas, Brianna.
KEILAR: So a lot of people are already paying $4 a gallon in several states --
VELSHI: Yes, sure.
KEILAR: -- but we always talk about the national average. It hasn't hit four bucks, but no doubt, it's going to.
VELSHI: Just about there though. For all intents and purposes -- kind of like talking about a recession, isn't it? If you're there, you're paying for it, the semantics of a couple cents doesn't make a difference.
KEILAR: That's right.
Ali Velshi, telling us how it really is.
LEMON: Boy oh, boy what a day on Wall Street and we're covering it all for you here in the CNN NEWSROOM.
As a matter of fact, the next hour of the CNN NEWSROOM starts right now.
