July Unemployment At Four-Year High

The Labor Department says the nation's unemployment rate climbed to a four-year high of 5.7 percent in July. Employers cut 51,000 jobs, less than the 72,000 jobs economists had predicted. July's cuts mark the seventh straight month employers slashed jobs.

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MICHELE NORRIS, host:

Now to the latest unemployment numbers. The unemployment rate in the U.S. has risen again to a four-year high. It is now at 5.7 percent. Last month, employers eliminated about 51,000 jobs from their payrolls. That makes seven months in a row that the economy has lost jobs.

It was further evidence of just how much trouble the housing downturn and energy prices are causing. For many of those looking for work now, their first stop will be to apply for unemployment insurance, but as NPR's Jim Zarroli reports, more and more people are finding that they're not eligible to receive it.

JIM ZARROLI: More than a year ago, the resort company where Jane Ann Springston(ph) worked started offering employees severance packages. They could only receive them if they voluntarily resigned from their jobs.

Ms. JANE ANN SPRINGSTON (Former Resort Company Employee): I didn't know what to do. I thought: why do I want to leave, I've been here 10 years? My boss, quote, said, "What I'm hearing, I think you should take the package."

ZARROLI: So Springston took the deal, quitting her job as an executive assistant. She's still out of work today, but when she went to apply for unemployment insurance in her home state of Florida, she received an unpleasant surprise.

Ms. SPRINGSTON: I was told I couldn't collect because I took the severance package. They tried to say it was like a volunteer, but I didn't volunteer. I was forced to quit.

ZARROLI: Nearly everyone who works has to pay into a state unemployment insurance fund. [POST-BROADCAST CORRECTION: Unemployment insurance is funded by employers.] It's supposed to provide a modest income if you lose your job, but Howard Rosen of the Peterson Institute for International Economics says only a little more than a third of U.S. workers actually qualify for the benefits when they lose their jobs.

Mr. HOWARD ROSEN (Peterson Institute for International Economics): This is one of the best-kept secrets in this country. Everyone thinks that unemployment insurance is there for everyone, and really it's only there for a minority of workers.

ZARROLI: Rosen says people who work part-time or temporary jobs don't qualify, nor do people who leave work for family reasons, and Rosen says that's not the only problem with the system. Unemployment insurance pays, on average, only about a third of a worker's salary.

Mr. ROSEN: So if you're able to overcome the eligibility problems, if you are, quote, "lucky enough" to receive it, if you do, it's not very much help.

ZARROLI: The unemployment insurance system was created during the Depression. Since then, the labor market has changed enormously, with many more part-time workers, for instance. But Maurice Emsellem of the National Employment Law Project says that in most states, the system has never been changed to reflect that. Emsellem says Congress is considering a bill that would provide states with money to modernize their systems.

Mr. MAURICE EMSELLEM (National Employment Law Project): It's really not rocket science. Many of these reforms have been adopted by the states, and what's needed now is the help in the form of extra funding to really incentivize states to do more of the same.

ZARROLI: Such a bill would allow the states to open up unemployment benefits to many more people. For instance, a state could extend benefits to people who had to move because their spouses lost their jobs and relocated.

ZARROLI: Diana Furchtgott-Roth of the Hudson Institute says that would strain the system financially.

Ms. DIANA FURCHTGOTT-ROTH (Hudson Institute): So the unintended consequences of this is that there'd be a lot more people on unemployment benefit, and the Unemployment Insurance Fund is paid for with taxes from employers, and that's basically taken out of workers' paychecks. So taxes on employers and workers would go up.

ZARROLI: But as today's unemployment report suggests, workers are finding it tougher to get jobs, and many will need unemployment benefits to get by. That can only put pressure on Congress to make those benefits available to more people. Jim Zarroli, NPR News.

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Correction Aug. 5, 2008

The story says that "nearly all workers" pay into an unemployment fund. In fact, unemployment insurance is funded by employers.

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