Long-term jobless eye bleak future as benefits end

Job seekers stand in line to speak with employers at a job fair in San Francisco, California November 9, 2011.

WASHINGTON (Reuters) - George Parks has been out of work for 21 months and his unemployment benefits will run out at the end of the month.

At 60, he fears his prospects of getting a job are very slim, even though he has a degree in civil engineering and has vast experience in project management.

A similar story is recounted by John Jones, 52, a fellow resident of Lancaster County, Pennsylvania. Jones lost his teaching job last July as the Pennsylvania state government tried to close a funding shortfall.

Parks and Jones are among the nearly 7 million Americans receiving jobless benefits under seven different state and federal programs. Around a quarter of those will fall off the rolls in January if Congress does not renew an extended benefits program that expires at year end.

Parks' savings are almost exhausted and his house has lost more than 30 percent of its value, making it hard for him to seek job opportunities outside Pennsylvania.

He has tried to market his management skills in manufacturing and the fast-growing field of health care, but has found them already overcrowded.

"It's really getting tight," Parks told Reuters. "The ability to provide is really diminishing and it becomes more the ability to survive."

Parks is collecting $500 a week in unemployment benefits, a far cry from the $80,000 a year he made in his last job as a project manager in architecture and construction.

Although his wife still has her teaching job, they are stretching to cover their monthly expenses, which include a $480 monthly car payment.

Last month, they combined and refinanced their mortgage and home equity loan, lowering their payment to $1,600 a month from $2,175. Gone are the vacations and gym memberships.

"Savings are pretty much gone, we are now into our 401(K) (retirement) money. I haven't bought any clothing in a year and a half; my wife does buy stuff occasionally to be presentable at school," said Parks.

"We have taken no vacations. I just spoke to the gym about volunteering some of my time instead of having to pay for the gym membership."

Jones, who is married and has one child, used to make about $40,000 annually teaching . His wife has an hourly paid job. He declined to say how much he was collecting in unemployment benefits.

"Before I lost my job we could go out and buy extra things for the house. Right now we do not have that option. We have to watch everything that we're spending and buying," said Jones.

That includes foregoing dental check-ups.

"Our savings are about gone and the benefits will be running out fairly soon," Jones added.

BENEFITS RUNNING OUT

The Obama administration estimates that through the course of 2012, about 6 million people would lose federally funded unemployment benefits if Congress does not act.

Currently, federal money ensures that the unemployed receive benefits for up to 99 weeks in states where joblessness is high. Ending the program would mean the newly unemployed would have to rely on state programs that usually last for only 26 weeks.

Extended benefits have been renewed several times as the economy struggled to mount a vigorous recovery from the 2007-09 recession, the worst since the Great Depression.

According to Christine Owens, executive director of the National Employment Law Project, the average unemployed worker receiving extended benefits gets just $296 a week.

"That represents only 50 percent of the income needed to cover the most basic necessities of food, housing and transportation," she said.

The extended federal benefits have become a target in the fight over budget policy between Republicans and Democrats, and renewal is uncertain. Analysts warn that removing that cushion from the millions of unemployed would dampen the still-fragile economic recovery.

"If the unemployed do not have money to spend, then spending in the economy is going to decline. Providing unemployment benefits is one of the effective ways to create jobs," said Lawrence Mishel, head of the liberal Economic Policy Institute in Washington.

Analysts estimate that not extending benefits for the long-term unemployed could chip away as much 0.3 percentage point from GDP.

NO STIMULUS FROM JOBLESS BENEFITS?

Those opposed to extending the benefits, including the conservative Heritage Foundation, argue that they have failed to stimulate the economy and are instead encouraging recipients to continue seeking jobs that do not exist.

Half the jobs lost during the downturn were in manufacturing and construction. Most of them are not going to be recovered. That is bad news for Brian Krady, another Lancaster County resident, who lost his job in August after 20 years in manufacturing.

Krady, 47, is collecting $500 a week in jobless benefits that will extend for several more months.

The Heritage Foundation says raising benefits to 99 weeks has increased the unemployment rate by 0.5 percentage point.

"People are trying to find jobs similar to what they had previously, when those jobs completely don't exist, so they will spend a good portion of their period unemployed looking for jobs that they are unlikely to find," said James Sherk, a senior policy analyst at the Heritage Foundation.

"The only sound arguments for extended unemployment benefits are humanitarian."

DESPERATE TO WORK

Jones and Parks bristle at the suggestion they are contributing to the high unemployment rate by staying on benefits for a long time.

Both men have been actively looking for work with the help of the PA CareerLink of Lancaster County. The unemployment rate in the county is 6.1 percent, 2-1/2 percentage points below the rate for the nation as a whole.

Jones said he has applied for more than 100 jobs since being laid off, and some of them outside education.

"Most people don't respond. I have gone to visit places, trying to get a job and you can't even get past the front desk," he said. "You can't make a pitch, they just don't want to talk to you. Right now I am looking to work. I don't care what it is in."

Parks believes his age puts him at a disadvantage.

"I believe I run into some age discrimination when I get an opportunity to interview. Things go well into the interview, it sounds like it will progress to the next stage," he said.

"In one case they asked for a background check and they just disappeared. This has happened three times," said Parks. "You can't blame the employer, if they can find somebody younger and cheaper, and there is a glut of employees there, why should they choose to go with an experienced, expensive worker?"

The longer Parks and Jones remain unemployed, the dimmer their prospects of getting a job become as they lose skills and connections.

About 43 percent of the 13.3 million unemployed Americans have been out of work for 27 weeks and more.

"Most of the long-term unemployed are people who had pretty good jobs and these jobs were permanently eliminated," said Harry Holzer, professor of Public Policy at Georgetown University in Washington.

"If they exhaust their benefits ... what are their options?"

Already, the labor force participation rate -- the percentage of working-age Americans either with a job or looking for one -- is at 28-year lows.

While many experts advocate retraining, especially for those who lost their jobs in construction and some sections of manufacturing, Holzer warned that will not necessarily help older unemployed workers like Parks.

"For people who are in their 50s, it's hard to go back and retrain. A 55-year-old with a brand new degree is less attractive than a 25-year-old with the same degree," said Holzer.

Analysts say some of the long-term unemployed could end up settling for lesser-paying jobs, but even those are in short supply. For every one job opening, there are about 4.6 people.

"It means there are simply no jobs available for more than three out of four unemployed workers," said the Economic Policy Institute's Mishel.

"In a given month in today's labor market, the vast majority of the unemployed are not going to find a job no matter what they do." (Reporting by Lucia Mutikani; Editing by Dan Grebler)