U.S. unemployment rate drops slightly

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Houston job fair
Scott Dalton / Bloomberg News
Job seekers attend a career fair at Toyota Center in Houston. The number of Americans filing claims for jobless benefits in July fell more than economists predicted, a sign that some employers have stopped paring staff as the recession eases.
President Obama says the dip in the jobless rate to 9.4% in July from 9.5% in June is a sign the recession has bottomed out but cautions the nation has 'a steep mountain to climb.'
By Jim Puzzanghera and Marc Lifsher
11:19 AM PDT, August 7, 2009
Reporting from Sacramento and Washington -- President Obama touted today's surprising drop in jobless numbers as a positive sign that the recession has bottomed out, but cautioned that the nation still has "a steep mountain to climb" to full economic recovery.

"I'm convinced we can see a light at the end of the tunnel," he said in remarks from the White House after the news that the U.S. unemployment rate dropped slightly to 9.4% in July.

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The rate went down from 9.5% in June -- the first decrease since early 2008 -- despite the loss of 247,000 jobs nationwide as a larger number of people stopped looking for work, the Labor Department reported today. The drop surprised economists, who largely had predicted it would increase to 9.6%.

"The dawn of an economic recovery is here," said Sung Won Sohn, an economist at California State University-Channel Islands. "The sharp contraction in employment has moderated, pointing to the end of the recession."

Particularly significant is a new uptick in the number of hours in an average work week and hourly pay, he said. But the new figures only mean that the economy is bottoming out, and "the job market will lag behind." Hiring will remain sluggish until employers conclude that a sustained recovery is underway.


Obama said he was still worried about the continued job loss.

"As far as I'm concerned, we won't have a true recovery until we start creating jobs," he said. Still, Obama said actions taken by his administration, including the $787-billion stimulus package enacted this year, had helped rescue the economy from "catastrophe" while starting to "build a new foundation for growth."

Although the job loss is continuing, and 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 -- and averaged 645,000 jobs lost a month from November through April. The unemployment rate has essentially remained flat for three months, although economists noted it still is likely to rise before reversing course for good.

"It's unlikely that we've actually peaked yet on the unemployment rate. . . . I suspect we'll probably still lose jobs for the rest of the year, but at a slower pace. The unemployment rate maybe won't go quite as high as we thought it would," said Nigel Gault, chief U.S. economist for IHS Global Insight, who has forecast the rate to hit 10.3%. "The huge increases are now behind us. We're in the process of beginning to flatten out here."

The new figures came amid some strong signals the recession has bottomed. Home sales have been improving and the stock market has been rallying. Last week, the government reported that the U.S. economy shrank at an annual pace of 1% in the second quarter, a major improvement over the decline of about 6% in the previous six months.

"We're not out of the woods yet, but at least the trend is in the right direction," Diane Swonk, chief economist at Mesirow Financial, said of the jobs picture. "It's still an upward battle here, but at least the worst of the crisis has passed."

But signs of economic trouble remain. Retail sales are on track to have dropped for the 11th straight month in July. And high unemployment remains a major impediment to a recovery. Although the jobless rate slipped last month, it was still dramatically higher than the 5.8% rate a year earlier.

The economy has lost 6.7 million jobs since the recession began in December 2007, and a total of 14.5 million people are out of work, the Labor Department said today.

For all those reasons, the Obama administration and Congress are considering acting again to extend unemployment benefits.

States pay for standard unemployment benefits, generally offering 26 weeks of checks. But in dark economic times, the federal government often steps in and pays to extend those benefits. Congress has acted three times during this recession to temporarily extend benefits, with workers in California and other states with high unemployment eligible for up to 79 weeks of benefits. All told, about 9 million people are receiving unemployment checks, with about 2.7 million of those getting the extended federal benefits, which begin to phase out at the end of next month.

But as the recession continues, about 80,000 Californians and 540,000 people nationwide will run out of benefits by the end of September, with the clock running out on an additional million by the end of the year, according to the National Employment Law Project. The organization wants Congress to provide 10 more weeks of benefits for unemployed workers in all states and 20 weeks for those in states such as California with jobless rates above 11%.

In July, the number of people who had been without work for at least 27 weeks increased by 584,000 to a total of 5 million, according to the Bureau of Labor Statistics. The National Employment Law Project said the number of long-term unemployed was at an all-time high.

"You have this desperate situation with long-term unemployment, and now folks are running out in big numbers of unemployment benefits," said Maurice Emsellem, the group's policy co-director. "There's a real need to get something done by September."

Rep. Jim McDermott (D-Wash.), who is chairman of the House subcommittee that oversees unemployment benefits, has introduced legislation to continue the federal extensions through 2010. His bill, which will be considered next month, also would provide an additional 13 weeks for California and 19 other states with an average unemployment rate of at least 9% over the previous three months.

Obama administration officials are pushing for an extension.

"Over the course of the next few months, you're going to have people that will exhaust the . . . benefit cycle that they're in," White House Press Secretary Robert Gibbs said this week. "The president and the economic team believe that extending those benefits and ensuring that the unemployed can get what they need and continue looking for work is tremendously important."

jim.puzzanghera@latimes.com

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