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Unemployment rate decline may indicate the recession has hit bottom

But the surprise decline to 9.4% in July from 9.5% in June came as the nation lost 247,000 more jobs last month, bringing the total since the recession began to 6.7 million.

August 08, 2009|Jim Puzzanghera and Marc Lifsher

AND MARC LIFSHER, WASHINGTON AND SACRAMENTO — A surprising drop in the nation's unemployment rate provided another strong indication that the recession has hit bottom, but analysts warned that it still would take months for the economy to climb out of its deep hole.

The decline in the jobless rate to 9.4% last month from 9.5% in June came as the nation lost 247,000 more jobs in July, bringing the total since the recession began to 6.7 million.

But July's losses were fewer than expected and a far cry from the 645,000 job losses the economy averaged each month from November through April.

Economists were encouraged that the jobless rate now has remained essentially flat for three months. The new figures prompted a fresh rally on Wall Street and followed recent indications that the worst of the recession was over, with the decline in gross domestic product slowing dramatically and home sales numbers improving.

Some economists were forecasting growth beginning again in the second half of the year.

"The dawn of an economic recovery is here," said Sung Won Sohn, a nationally known economist at Cal State Channel Islands in Camarillo. "The sharp contraction in employment has moderated, pointing to the end of the recession."

Friday's decrease in the unemployment rate -- the first drop since early 2008 -- came because job cuts slowed in some industries, including manufacturing, while the auto industry saw fewer layoffs than anticipated.

But the Labor Department said there was a discouraging reason for the auto industry's increase of 28,000 jobs -- "previous cuts had been so extensive that there were fewer workers to lay off during the seasonal shutdown."

But unemployment continues to be a problem, and the rate probably will rise again before job creation starts sometime next year, economists said. They pointed out that new jobs created in the first few months of the recovery were unlikely to keep up with the growth of the labor force.

Although the job loss is continuing and is forecast to continue into next year, the pace has slowed considerably. The economy lost 443,000 jobs in June, revised from an earlier estimate of 467,000.

"The huge increases are now behind us," said Nigel Gault, chief U.S. economist for IHS-Global Insight, who had forecast the unemployment rate to hit 10.3% but may revise that downward. "We're in the process of beginning to flatten out here."

Still, that means the number of unemployed will continue to increase from the current 14.5 million people, as well as the 8.8 million underemployed Americans who have had to settle for part-time jobs.

About 9 million people rely on unemployment benefits to pay for housing, food and other basic needs. And for many of them, unemployment checks may be running out.

"It's kind of hard to be positive when you have no irons in the fire and no callbacks," said Debra Trepagnier, 54, of Compton, whose benefits run out in October. She is an administrative clerical worker who has only been able to get seasonal, part-time employment with the Los Angeles Unified School District.

For about 540,000 long-term unemployed, the checks will stop coming beginning next month, according to the National Employment Law Project, a Washington group that advocates for low-wage workers.

A million more jobless people could be in the same boat by year's end, unless Congress authorizes another benefit extension, the fourth in a prolonged 21-month recession. The extension, even for an additional 13 or 20 weeks, can't come soon enough for many increasingly desperate California workers.

Benefits run out in September for A.C. Soria, a construction project manager from Costa Mesa. He worries that he's depleting his once-substantial savings even after getting the maximum weekly benefit of $475.

Soria, 55 and single, said he no longer could afford to pay for health insurance.

"It's rough out there. Nobody is working," he said. "I've been looking seriously for about a year, but I've had only six interviews" since being laid off in March 2008 as remodeling supervisor for a chain of coffee-and-tea shops.

Benefits will expire for 143,000 Californians as of Sept. 1, and all three current extensions will on Dec. 31, affecting a total of 264,000 people, according to the California Employment Development Department.

"It's a pretty desperate situation in California," said Maurice Emsellem, policy co-director in Oakland for the National Employment Law Project. Long-term jobless people probably have "depleted their savings and moved out of their houses," he said.

California's unemployment rate was 11.6% in June, more than two percentage points above the national figure and the sixth-highest in the country.

President Obama touted the July drop in the nation's unemployment rate as a sign that his administration's policies, including the $787-billion stimulus package, had helped rescue the economy from catastrophe while starting to "build a new foundation for growth."

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