Spanish unemployment, the highest in Europe, rose more than expected as inflation accelerated and retail sales plunged, undermining the nation’s recovery from its worst recession in six decades.

Joblessness rose to 21.3 percent in the first quarter, the National Statistics Institute said today in Madrid, compared with 20.3 percent in the previous three months and a median forecast of 20.7 percent in a Bloomberg News survey.

Consumer prices rose 3.5 percent in April from a year earlier, based on a European Union measure, after increasing 3.3 percent in March. Retail sales fell 8.6 percent in March from a year earlier, the steepest decline in two years, INE said.

Spain is trying to steer the economy back to growth while slashing the euro region’s third-largest budget deficit with the deepest austerity measures in at least three decades. Rising interest rates and oil prices prompted the government to revise its growth and unemployment forecasts on April 6, even as it still sees growth of 1.3 percent this year, led by exports.

“In the current scenario, with rising interest rates, I’m not at all sure this is the peak” in unemployment, said Jose Luis Martinez, a strategist for Spain at Citigroup in Madrid. “The decline in employment, rising interest rates, and rising prices leave little margin for consumption to be reactivated.”

‘Hard to Predict’
Deputy Finance Minister Jose Manuel Campa said the first quarter is traditionally weak for employment, and the data should start to improve. Asked if the jobless rate had peaked, he told reporters in Madrid it’s “hard to predict the future.”

Spain has 4.9 million jobless workers, the survey showed today, compared with 3 million in Germany, a country twice its size. The Socialist government says the number of unemployed won’t reach 5 million.

As companies adjust to forecasts of slower growth in Spain after a decade-long boom, Telefonica SA (TEF), the country’s largest telecoms operator, said on April 14 it plans to cut its workforce in its home market by 20 percent over the next three years. London-based Burberry Group Plc closed a warehouse in Spain last year, while Diageo Plc (DGE) cited “economic weakness” on Feb. 10 when it said its Spanish whisky and vodka sales declined in the last six months of 2010.

Spain’s recovery from the collapse of the debt-fueled property bubble is being undermined by spending cuts and tax increases as the government aims to narrow the deficit to 6 percent of gross domestic product this year – in line with France’s projected shortfall – from 9.2 percent in 2010.

Forecasts
The government expects the jobless rate to fall to 19.8 percent on average this year, the Finance Ministry estimated on April 6, compared with a previous forecast of 19.3 percent. The economy will expand 1.3 percent in 2011 after two years of contraction, accelerating to 2.3 percent next year and 2.4 percent in 2013, it said.

“The market consensus is around 0.7 percent” for 2011 growth, said Martinez, adding that the government should revise its forecast “as there have been a lot of negative factors.” He said he sees a jobless rate of 21 percent this year.

The European Central Bank increased its benchmark interest rate on April 7 for the first time in almost three years and policy makers have signaled more increases may follow. That risks further crimping household spending in Spain, where 97 percent of mortgages have variable interest rates.

Price Pressures
The ECB is trying to stem inflation, which probably accelerated to 2.7 percent in the euro region in April, according to a Bloomberg News survey of 34 economists, from 2.6 percent in March. Inflation in Spain, Portugal and Greece, which are all struggling to rein in growing debt burdens and spur growth, is higher than the euro-region average.

As part of plans to raise tax revenue, the government will pass measures today to press employers to legalize underground jobs. The plan will offer “incentives” to declare unregistered workers before tougher sanctions on clandestine employment are imposed in three months time, Labor Minister Valeriano Gomez said yesterday. It also aims to toughen sanctions on those working illegally while claiming jobless benefits.

Oil prices continue to surge higher, with the June contract on the New York Mercantile Exchange hitting a 31-month high near $ 113 a barrel. That’s just the ticket for Baker Hughes, the world’s third-largest oil services provider.

The company provides a full array of services to all kinds of exploration and production companies in more than 90 countries, including:

• Drilling, evaluation, and fluids.

• Completions, production, and chemicals.

• Pressure pumping.

• Reservoir development services.

The pressure pumping services come courtesy of Baker Hughes’ $ 5.5 billion acquisition of BJ Services last year. The move turned Baker Hughes (BHI) into a one-stop shop for oil services. That particularly helps the company overseas, where many oil companies want all their services in a single package.

Given Baker Hughes’ prominent position in a growing market, you may want to take a look at its stock.

The company’s profit almost tripled to $ 381 million in the first quarter from $ 129 million a year earlier, easily beating analysts’ estimates. Revenue soared 78 percent to $ 4.53 billion, also topping analysts’ forecasts.

The BJ Services purchase, an improvement in profit margins overseas and a surge of oil and gas drilling in the U.S. fueled the gains. The company said its pressure-pumping services are sold out in North America.

As for foreign profit margins, they rose to 12.2 percent in the first quarter from 9.1 percent a year earlier. The company expects continued improvement, with the margin possibly reaching the mid-teens next year.

“High oil prices have spurred both international oil companies and national oil companies to accelerate their spending plans,” Baker Hughes CEO Chad Deaton said in a statement.

“Assuming oil prices do not increase to levels high enough to destroy demand, we expect oil-driven spending growth to be sustained for multiple years.”

Standard & Poor’s analyst Stewart Glickman has a four-star buy rating on Baker Hughes. “We think BHI’s post-BJ Services merger cost-cutting efforts continued to bear fruit,” he writes. “We also see prospects for activity and pricing gains in 2011 and 2012.”

When Warren Buffett starts investing billions of dollars into a sector, you can bet it’s an industry on the rise. Buffett’s Berkshire Hathaway bought Burlington Northern Santa Fe for $ 26.5 billion last year. The company helped Berkshire’s profit jump 43 percent in the fourth quarter.

Burlington Northern isn’t the only railroad humming down the track. Norfolk Southern (NSC), the country’s fourth-largest railroad, and Union Pacific (UNP), the nation’s biggest, are seeing strong business too. So it’s a good time to consider their stocks.

Norfolk Southern

Norfolk Southern saw its profit surge 31 percent in the fourth quarter to $ 402 million from $ 307 million a year earlier, topping analysts’ estimates. Revenue rose 14 percent to $ 2.39 billion.

All three of the company’s business divisions recorded double-digit revenue increases amid strong demand from industrial customers. And Norfolk Southern expects the good times to continue rolling. “We have every reason to believe that 2011 will be an even stronger year for us” than 2010, CEO Wick Moorman said in a statement.

Many analysts like the stock, noting that the company has generated a free cash flow of about $ 1 billion during five of the past six years. “Medium-term trends in NSC’s primary markets remain favorable and support rising traffic,” writes Standard & Poor’s analyst Kevin Kirkeby, who has a four-star buy rating on the stock.

Union Pacific

The company reported record first-quarter net income of $ 639 million, up 24 percent from $ 516 million a year earlier. Sales rose 13 percent to $ 4.49 billion, exceeding analysts’ estimates.

Even rising oil prices couldn’t keep Union Pacific’s profit down. Increased volume for all the commodities carried by the company buoyed its business. And Union Pacific expects volume to keep climbing, as the economy sustains its recovery. Meanwhile, the company can impose fuel surcharges to make up for its own higher energy costs.

“So far we haven’t heard anything that puts the rail volume, pricing, or margin (ex-fuel) thesis at risk,” Jefferies & Co. analysts write. Of seven analysts tracked by Yahoo, five have buy or equivalent ratings, and the other two are neutral.

Stephen Schork, president of the Schork Group, explains why he believes oil and gas prices should continue to surge higher. He explains that he is bearish from a fundamental perspective, but that the dollar could continue to decline as the US government remains very accommodative. He says it will ultimately be “as bad or worse” than 2008.

As oil prices fell on Tuesday, Cramer guessed it may only go lower.

Oil companies that work best in this environment are those with the most growth, Cramer said. He likes the “wildcatters,” which are companies that drill in untouched lands. The wildcatters are some of the most volatile names in the oil space. Cramer noted they also have the most potential upside because when they find new oil, their growth skyrockets.

The “Mad Money” host ranked oil companies that he thinks will work when oil is lower, so home gamers can leg into them on the way down. These stocks need to be on your radar screen, he said, because their entry point could come soon.

To start, Cramer’s fave wildcatter is Hess [HESS Unavailable () ]. The New York City-based company has found great success in its strong, yet responsible approach to drilling. Hess was the first company to discover the Bakken shale, an oil-rich region that stretches from Montana to North Dakota along the Canadian border. Hess is now producing 25,000 barrels a day in the Bakken and operating 18 rigs.

Last quarter, Hess announced a large discovery off the coast of Ghana. The stock rallied 6 percent on the news, as the project could be worth up to $ 7 a share, Cramer said. It could add up to 500,000 barrels a day.

Hess also has projects in Egypt, the North Sea, Brazil, Australia and the Paris Basin. Its stock has begun to pullback because it’s most tied to the price of oil. Being as it’s roughly 7 points off its high of $ 87.40, Cramer thinks investors could put on a small position. He would wait for it go to lower before buying more, though.

Cramer recommends investors also look for Occidental Petroleum [OXY 111.64 -4.10 (-3.54%) ] shares to fall. The Los Angeles-based oil company has assets around the world, Cramer said. He likes its wildcatting efforts in California, where he thinks it’s changing the game. The company drills down vertically, so it can hit four to five shale formations instead of the usual one or two formations. It’s already drilled roughly 150 wells in Kern County, Calif., which Cramer said could be worth up to $ 76 billion. Based on these unconventional California assets, Cramer thinks Occidental could double its share price. He recommends waiting for a pullback before buying OXY.

Finally, Cramer likes Anadarko Petroleum [APC 78.51 -1.84 (-2.29%) ]. He thinks it’s a terrific company, but said it’s stock is a little exploited. Yet he still considers it among the best wildcatters. It is an international wildcatter with international assets, including places like Ghana, New Zealand and more. He would let this stock come down before buying shares.