09/07/2009 05:12 am ET Updated May 25, 2011

Unemployment Rate Falls To 9.4 Percent In July

The unemployment rate fell to 9.4 percent as the U.S. economy shed 247,000 jobs in July, the government announced on Friday morning. The drop -- the first in 15 months -- comes as a surprise; economists had expected the rate to rise to as high as 9.7 percent.

By a broader measure that includes people who've given up looking for work or who can't find full-time jobs, the unemployment rate fell to 16.3 percent, down from 16.5 percent in June.

But in a grimmer development, the number of long-term unemployed -- people who've gone without a job for 27 weeks or longer -- rose by 584,000 to 5 million, from 4.4 million in June. Three out of 10 unemployed people have joined the ranks of long-term unemployed. What to do about all those people will become a more and more pressing problem as nearly 1.5 million Americans will exhaust their extended unemployment benefits by the end of the year.

"Never in the history of the unemployment insurance program have more workers been unemployed for such prolonged periods of time," said Christine Owens, director of the National Employment Law Project, in a statement. "An unprecedented 5 million -- one out of three jobless workers -- have been unemployed for six months or more, and their families are straining to meet basic needs in an economy that has not yet begun to produce jobs."

Heidi Shierholz, an economist with the Economic Policy Institute, credited the stimulus bill for preventing worse job numbers but said the government will need to take action on long-term unemployment.

"The recovery act is now creating hundreds of thousands of jobs but you can't put out a house fire with one hose," said Shierholz in a statement. "Additional policy interventions by Congress are desperately needed to provide relief and generate jobs, including an immediate extension of federal unemployment benefits for the long term unemployed."

Presidential spokesman Robert Gibbs told reporters Friday the report "is more evidence that we have pulled back form the edge" of a depression. At the same time, he said President Barack Obama still thinks the jobless rate will hit 10 percent later this year.

July's job loss numbers are way better than the data from June, when employers cut 467,000 jobs and unemployment reached 9.5 percent, its highest rate in 26 years. Friday's report will solidify the consensus that the rate of job loss is slowing along with the overall rate of economic decline.

Of course, that's no comfort to someone who's been out of work for a year and a half, has no hope of finding a job, and is about to run out of unemployment insurance. The Huffington Post has been profiling some of the regular people stuck in that situation -- click here to read their stories.

The Associated Press contributed to this report.