Unemployment To Hit 26-Year High, Rising To 9.6 Percent
WASHINGTON — Americans lucky enough to still have a job are noticing something unpleasant in their paychecks: They're making less money.
Employers cut 467,000 jobs in June, far more than expected, and the jobless rate hit a 26-year high of 9.5 percent. Just as worrisome, wages shrank to their lowest in nearly a year.
The bleak news Thursday from the Labor Department underscored one of the big threats to an economic turnaround: Rising joblessness and falling wages for those still working could send Americans back into spending hibernation and short-circuit any recovery.
President Barack Obama acknowledged concern. "What we're still seeing is too many jobs lost, too many families who are worried about whether they're going to be next in terms of job loss, or whether they can find another," he told The Associated Press.
The falling wages come from furloughs, pay freezes and pay cuts imposed by employers across the country. Many also have cut hours: The average work week in June fell to 33 hours, the lowest on records dating to 1964.
Nathan Bieber, 26, who works at Einstein Bros. Bagels in Phoenix, works 28 to 30 hours a week now, down from his previous 37 _ a loss of up to $100 weekly. He's canceled his Internet service and deferred payments on student loans six times.
His wife, who is legally blind and works at another Einstein Bros. location, has had her hours slashed from 30 to 15. They rely on her disability pay for rent and the electric bill.
"If it weren't for that," he said, "we'd be homeless."
The bleak jobs news sent stocks sinking. All the major stock indexes finished down more than 2.5 percent, including a 223-point drop for the Dow Jones industrials, its worst performance in more than two months.
Job losses had decreased every month since January, but they rose in June. The 467,000 job losses were up from 322,000 in May and far worse than the 363,000 economists were expecting.
By comparison, the rise in the unemployment rate for June was small, up just a tenth of a percentage point to 9.5 percent. Many economists predict it will hit 10 percent this year and keep rising into next year before falling back.
Including laid-off workers who have given up looking for jobs or have settled for part-time work, the so-called underemployment rate was 16.5 percent in June _ the highest on records dating to 1994.
The recession has taken out 6.5 million jobs in about a year and a half. All told, nearly 15 million people were considered unemployed in June.
"Whatever is available, you kind of have to take it," said Shirley Walker, 58, who lost her job running a nonprofit in Orlando, Fla. "If you've been out there working, and you have a career, now it's like starting a career all over again."
Illustrating how hard it is to land a job, 29 percent of the unemployed have been out of work six months or longer. That's the most on records dating to just after World War II. The unemployment rate for teenagers is 24 percent, the highest since 1983.
Average weekly earnings fell about $2 in June to $611.49, the lowest in nearly a year and the first month-to-month drop since March.
Federal Reserve Chairman Ben Bernanke has predicted the recession, the longest since World War II, will end later this year. And most economists still think that will happen.
But the strength of any recovery will depend heavily on Americans' willingness to borrow and spend. And they have been using more of their income to save or pay down debt.
"The job market will become the Achilles' heel of the coming recovery," said Sung Won Sohn, an economist at California State University, Channel Islands.
Last month's job losses were widespread. Professional and business services slashed 118,000 jobs. Manufacturers cut 136,000, construction companies 79,000, retailers 21,000. Education and health services were among the few industries hiring.
Economists said a chunk of the job losses probably came from plant shutdowns at General Motors Corp. and by other auto industry troubles that may ease later this summer.
The White House last week said federal stimulus money was being shoveled out of Washington quickly but states aren't steering the cash to counties that need jobs the most. Much of the benefit of Obama's increased government spending on big public works projects won't kick in until 2010, analysts say.
"We are in some very hard and severe economic times," Labor Secretary Hilda Solis said in an interview Thursday. "The president and I are both not happy."
Still, Solis said it was too early to consider a second government stimulus, saying more time is needed for the first one to take hold. "I do think the public needs to be patient," she said. "We know they are hurting."
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AP Writers Mike Schneider in Orlando, Fla., and Terry Tang in Phoenix contributed to this report.
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JEANNINE AVERSA | 07/ 2/09 05:29 PM |