The unemployment rate surged to 5.5 percent in May from 5 percent -- the sharpest monthly spike in 22 years -- as the economy lost 49,000 jobs, registering a fifth consecutive month of decline, the Labor Department reported Friday.

The weak jobs report, coupled with a staggering rise in the price of oil -- up a record $10.75 a barrel to more than $138 -- unleashed a feverish sell-off on Wall Street, sending the Dow Jones industrial average down nearly 400 points. The dollar plunged against several major currencies.

Investors' recent hopes that the United States might yet skirt a recession sank swiftly in the face of gloomy indications that the economy is gripped by a slowdown and pressured by record fuel prices.

For tens of millions of Americans struggling to pay bills, the jobs report added an official stamp of authority to a dispiriting reality they already know: A deteriorating labor market is eliminating paychecks just as they are needed to compensate for the soaring cost of food and fuel, and as the fall in house prices hacks away at household wealth and access to credit.

"It's unambiguously ugly," said Robert Barbera, chief economist at the research and trading firm ITG.

Economists had expected the unemployment rate to rise, but the size of the jump, largely driven by a surge in teenagers seeking jobs, caught them by surprise, The Boston Globe reported. Many suggested the data, which can fluctuate from month to month, overstated the extent of joblessness in May.

Still, economists said, it's clear the labor market is weakening. "The trend may not be up a half-percent, but it's clearly up," said James O'Sullivan, economist at UBS AG in Stamford, Conn.

President Bush acknowledged the jump in unemployment as an indication of "slow economic growth," but he held out hope that $100 billion in tax rebates now being distributed to American households would spur spending and generate jobs.

"We're beginning to see the signs that the stimulus may be working," Bush said during a swearing-in ceremony for the housing secretary, Steven C. Preston.

Democrats on Capitol Hill and advocates for the unemployed pointed to the spike in joblessness in arguing for the swift extension of federal unemployment insurance.

Among the 8.55 million people who were unemployed in May, 1.55 million had been unemployed for 27 weeks or longer. Unemployment benefits now expire after 26 weeks. An Iraq war financing bill approved by the Senate includes a provision that would extend cash benefits for an additional 13 weeks.

"It would show a new level of callousness by Congress, a new level of disconnect between Washington and the rest of the country, not to pass an extension now," said Andrew Stettner, executive director of the National Employment Law Project, an advocacy group.

The White House has said it would veto the bill for imposing deadlines on the withdrawal of troops from Iraq. The administration also argues that jobless benefits should not be extended with the unemployment rate still low by historical measures. Tony Fratto, a White House spokesman, said Friday's report did not change that position.