Stocks Rally After Jobs Report Announces First Drop in Unemployment Rate This Year

Jobs report announces first drop in unemployment rate this year.

August 06, 2009, 10:54 AM

Aug. 7, 2009— -- Stocks once again rallied today as investors were pleased with a much better-than-expected jobs report. The Dow Jones industrial average climbed 113 points to close at 9,370, closing off another straight up week on Wall Street.

The Standard & Poor's 500, the broadest index of the nation's corporate economy, rose 1.3 percent to close at 1,010, a 10-month high. The Nasdaq rose 1.37 percent today to close at 2,000.

With the pop Friday, the S&P 500 index is up 14.9 percent in only four weeks and 49.4 percent from a 12-year low in early March.

The American economy has shed 6.7 million jobs since the start of the recession, but workers got a bit of good news this morning: the unemployment rate dipped for the first time in more than a year. It now stands at 9.4 percent, down from 9.5 percent. The U.S. Department of Labor reported this morning that employers still cut payrolls in July, but the total job losses were far lower than expected: 247,000.

"The worst may be behind us," President Barack Obama said outside the White House today.

The slowing rate of job losses is leaving economists to believe that the economy is well on its way to recovery. From May to July job losses averaged 331,000 a month, down significantly from the 645,000 a month lost from November to April.

"Today, we're pointed in the right direction," Obama said.

Despite the better-than-expected jobs report, Obama added that there is still a "steep mountain to climb" towards economic recovery.

"We have a lot further to go," he said. "As far as I'm concerned, we will not have a true recovery until we stop losing jobs."

Nonetheless, with 14.5 million of Americans still contending with unemployment, the heartache continues.

For Clint White of Port Orange, Fla., losing his job as a pilot with a flight instruction company meant living a more frugal lifestyle.

Laid off twice in the past 12 months, most recently in February, White has turned to clipping coupons, eating at home and even cancelling the wedding ceremony that he and his wife never had to help make ends meet. And, soon, the couple may also have to turn to food stamps.

"We've had to cut back on everything," said White, 40. "I went from making a six-figure income to zero literally overnight."

White's wife, a biologist by training, found a part-time job working at a local deli. The childless couple has been living off of savings to supplement his unemployment benefits. But those savings are quickly dwindling and the couple will soon cash out their 401(k) to help pay for the mortgage, he said.

White may soon join the more than 34 million people already receiving food stamps. Since the recession hit in December 2007, that number has been growing.

In May, a record 34.4 million people were enrolled in the food stamp program, signifying a six consecutive month increase, according to the most recent available statistics .

Overall, the country experienced a 2 percent increase in the program's enrollment from April to May -- approximately one in nine Americans now receive food stamps. The number of people receiving food stamps jumped the most in White's home state of Florida, with a 4.2 percent increase from April to May.

But, for some struggling households, getting food stamps isn't an option. Many families make too much to be eligible for the program but, in reality, some of them are barely getting by.

Difficult Job Search and Government Financial Assistance

When Brian and Theresa Quick of Virginia Beach, Va., went to the local social services office recently to apply for the program, they were told that with her $1,500 monthly income from a part-time job as a bookkeeper and his unemployment check, they made too much.

"I can tell you right now that the people coming in and out of there in the four hours I've been there, they drive better cars than me but they can buy food with food stamps," said Brian Quick, who was laid off from his job as a warehouse manager in November.

Social services, instead, directed them to a local church, where they received a free bag of groceries. Aside from that, the family has not qualified for other government assistance, meaning further sacrifices for the couple and their two young daughters.

"They kind of understand," Quick, 50, who now works part-time as a security officer, said of his children, who are 5 and 6. "They say that if we need money, we can take it out of their piggy banks."

The family's car was almost repossessed and Theresa Quick, 43, has twice pawned her wedding ring -- the second time, the couple couldn't come up with the money to get it back.

The Quicks are far from alone. Financial setbacks have also had tangible effects on Joy O'Campo's day-to-day life.

O'Campo, 34, worked in human resources for 10 years before she was laid off from her last job in March 2008. Although she has found a job as a benefits administration analyst at a temporary agency, which offers no benefits or vacation days, her home state of California says her income's too high to qualify for food stamps, state sponsored health care and other assistance programs.

"Where's the help for people stuck in the middle?" said O'Campo, who took a $20,000 pay cut and moved to a less expensive apartment. "I'm not a homeowner but I'm not so poor that I qualify for existing government help."

O'Campo, who lives in Irvine, Calif., and has a master's degree in public administration, is even considering filing for bankruptcy because she is unable to pay back the credit card debt she accrued while unemployed.

"Being out of work for nine months, I used my credit cards quite a lot," she said. "Who can live on unemployment in Orange County?"

Unemployed High in Debt and Cut Spending

Hard times have limited O'Campo to a $40 to $45 weekly grocery budget that is half of what she was used to spend. She said she's lucky to have generous friends who paid for her medical insurance for nine months, but O'Campo has since dropped out of the federal COBRA program that gives some employees the ability to continue health insurance coverage after leaving employment.

Gas costs keep her from going out with friends and volunteering with the Big Brothers-Big Sisters program. The hardest part for her was cutting back on martial arts training, which she said kept her emotionally and physically healthy.

She said she's looking "everywhere, everyday" for a steady job.

"I've done a lot of recruiting being in HR, I know that people look at my skill set and education and they know I'm going to expect a lot of money, a permanent job and benefits, but once the economy turns around, I'd want to find something better," she said. "That is my goal and that's what I would be thinking, too, if I saw my resume. It's like a Catch-22."

There are, however, signs that the economy may be in recovery: The stock market has been climbing since March's market lows, the gross domestic product decreased at only a 1 percent pace in the second quarter and home sales rose for the fifth straight month in June.

But for families still reeling from the setbacks of job loss, the country's longest recession since the Great Depression has had long-term effects.

White, the out-of-work pilot who has been actively networking and searching for a job in aviation or sales, said he stays positive but also grounded in reality.

"The recession doesn't end for us until we're working," he said.

The Associated Press contributed to this report.

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