Unemployment rate drops
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"The decline in the unemployment rate is not a reflection of strength, but rather a sign of discouragement among the ranks of the unemployed," he wrote in a note to clients Friday.
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The unemployment rate fell to 9.5% from 9.7% in May. Economists had forecast it would climb to 9.8%. But the improvement was due mostly to many discouraged job seekers not bothering to look for work and no longer being counted as part of the labor force.
Joseph LaVorgna, chief U.S. economist for Deutsche Bank, said that many of those people stopped looking for work because they lost extended unemployment benefits. To receive the benefits, they needed to be actively looking for work.
"The decline in the unemployment rate is not a reflection of strength, but rather a sign of discouragement among the ranks of the unemployed," he wrote in a note to clients Friday.
Congress has failed to pass an extension of benefits, which resulted in nearly half-million people losing their benefits by the middle of June when the unemployment numbers were compiled.
Another 1.25 million have lost their benefits since mid-June, and nearly 800,000 more could lose benefits by the time July numbers are compiled.
The 14.6 million people still counted as unemployed have been out of work an average of 35 weeks, a record duration in the 62 years the government has tracked that figure.
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