Unemployment: June Payrolls Shrank, Unemployed Dig Deeper Into Savings to Survive

July 2, 2010 — -- Unemployment continued to wreak havoc in June, with the economy losing still more jobs as the government laid off workers hired for the U.S. Census.

The U.S. economy lost 125,000 jobs in June, though the unemployment rate fell to 9.5 percent, the Labor Department reported today. The numbers were worse than the 110,000-job loss economists had predicted in a Reuters survey. But the loss is not as sharp as it sounds, since 225,000 of those were Census jobs that temporarily distorted the reading. Private employers actually added 83,000 workers in June.

With today's numbers, 7.5 million jobs have been lost since the beginning of the recession more than two years ago. Prior to June, the economy had seen five straight months of jobs growth.

In remarks today from Andrews Air Force Base in Maryland, President Obama announced 66 new stimulus-funded infrastructure projects to provide broadband Internet access across the country. The projects, he said, will create 5,000 new jobs in construction and installation. Studies have shown, the president said, that the adoption of broadband access can lead to hundreds of thousands of new jobs.

Obama noted that June marked the sixth straight month of growth in private sector jobs. The country, he said, is "headed in the right direction" but "we're not headed there fast enough for a lot of Americans. We're not headed there fast enough for me either."

"The recession dug us a hole of about 8 million jobs deep, and we continue to fight headwinds from volatile global markets, so we still have a great deal of work to do to repair the economy and get the American people back to work," Obama said.

Long Term Unemployment Hurts

Millions of unemployed didn't need the numbers to remind them of their hardship. Especially the long-term jobless, who have been out of work for more than six months, are painfully aware that the economic recovery remains fragile.

"It's pretty frightening," says Jim Walloch, a former medical sales manager and single father of three, who lost his job 18 months ago and has spent almost $100,000 in savings to keep his family afloat. His subsidized COBRA health insurance ran out this week, and Walloch is considering whether to add another $2,000 to his monthly outflows to sign up for new insurance.

The data offered little hope for those like Walloch, who have been out of work for more than six months and fall into the "long-term unemployed" category. Almost 6.7 million Americans have been out of work longer than six months, with more than half -- 4.7 million -- jobless for more than a year, according to the U.S. Labor Department, the higest level since the government began tracking numbers in 1948.

Walloch, like others sharing his fate, doesn't have much patience for the political debate in Washington over whether benefits for the long-term unemployed should be extended. For the past eight weeks Senate Majority Leader Harry Reid has fought to extend the benefits after they lapsed on June 2, for workers who have run out of their standard 26 weeks of checks. Republicans have opposed the measure, reluctant to throw another $33.9 billion – the price-tag for the bill – into the deficit.

Will Cutting Benefits Hurt Economy?

"Walk for a mile in my shoes and see how it feels to be uninsured with three children, and then let's talk about the deficit," says Walloch, who lives in an Atlanta suburb. "I'd rather see the money going to help people like myself rather than on pork barrel spending."

Many economists argue that not extending the benefits could hurt the economy further.

"Folks who have been unemployed close two years, they don't have any other resources left," says Gus Faucher, director of macroeconomics at Moody's Economy.com. "If their benefits are cut they're going to cut back on their spending and that's going to weigh on the economy."

Faucher expects unemployment to rise further this year, mainly because any improvement in economic conditions is likely to bring job seekers who had temporarily given up their hunt, back into the market and therefore back onto statistician's radar screen. Faucher says it will take at least two more years for the unemployment rate to dip back to pre-crisis levels of around 6 percent.

Until then, Americans like Walloch are clipping coupons, skipping school fundraisers and hoping that benefits will be extended. Maurice Ensellem, policy co-director at the National Employment Law Project, says families have nowhere else to turn.

"They are stretched to the limit. If they had any income or retirement or other savings to turn to, that's been exhausted," he says. "Even a minor interruption in benefits is a hardship to these families."

With reporting from Matthew Jaffe