Mesirow Financial chief economist Diane Swonk said because there is no regular program and the benefits are decided by Congress, the economy will now feel the pinch as the spending from those benefits is lost. It also means the individuals will have to be supported in other ways.
"On the weekly claims data, we still don't know how much are reclaims, but now that they discontinued the unemployment insurance for 1.3 million people, the risk is that those people move into more costly social or welfare programs to get coverage," she said.
"We do not have safety nets that are structured in the U.S. to deal with long-term unemployment," she said.
Bernstein said, besides the unemployment benefit vote, Congress is showing that it is immobilized on other fronts, even as the Senate moves toward a vote on financial regulatory reform in the coming week.
"I don't think people realize it's the stale mate of nothing getting done," he said, regardless of whether they believe the economy needs more or less stimulus, tax cuts or tax hikes. "Washington has entered a monstrous policy stale mate and the markets have managed to roll over. You've got an employment situation that's eroding."
Swonk said the jobs situation is even worst than she anticipated. "We expected a jobless recovery. It's one thing to expect it. It's another thing to live it," she said.
She expects the second quarter to grow at a rate of 3.4 percent and the second half at about 3.6/3.7 percent.
"The question is what do we do for 2011, and we're working on that now. 2010 we had closer to 3.8 percent and that's looking more precarious," she said.
"There's a lot of mixed news. Even though the ISM (manufacturing survey) is weaker, we've still seen a lot of positive news on corporate investment. Shipments are good. Investment in technology is good," she added. "The recovery continues but you don't see anything normal in it...There's a constraint on the consumer's ability to leverage."
"It looks like we're healing, but we're healing with deep scars," she said.
Markets have the long holiday weekend to stew over June's disappointing jobs report. U.S. markets are closed Monday for Independence Day.
In the coming week, non-manufacturing ISM is the big data point, due out Tuesday. Also important will be retailer's monthly sales reports Thursday, as well as the closely watched jobless claims data, also reported Thursday.
The Bank of England and European Central Bank have rate meetings Thursday.
The dollar lost some of its safe-haven shine in the past week, as investors started to vote against it with each weak economic report. It was down 1.3 percent against the euro, which rose above $1.25 on a successful Spanish bond auction and as European banks requested less funding from the European Central Bank than expected.
David Gilmore of Foreign Exchange Analytics said the dollar could continue on its current course temporarily.
"I would say there's more downside for the dollar in the next couple of days. I would look for the euro to trade up to $1.28. I think people are going to be concerned again about Europe's banks. We have stress tests coming up at the end of July. We don't have a good idea of those stress tests. Are they credible and how do banks perform? That's something that could check enthusiasm for the euro," he said.
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