Sept. 4 (Bloomberg) -- Rebecca Alvarez, a 48-year-old single mother looking for work for more than a year, has won a one-month reprieve.

The Monrovia, California resident who lost her job as a computer-network administrator in March 2008 is due tomorrow to begin a stint staffing a booth at the L.A. County Fair -- at half her previous pay.

Alvarez first appeared in a Bloomberg News article July 10 about the growing ranks of Americans unemployed for more than six months. Her story shows how hard it is for America’s unemployed to find a job even as the nation starts to emerge from the worst recession since the 1930s. Many are settling for any work they can get and watching their earnings fall. That’s limiting consumer spending and may hamper an economic recovery.

“I haven’t given up on a full-time job, not at all,” Alvarez said in a telephone interview this week. “Then again, I’m not waiting for it to come to me. When you’ve been unemployed for a long time, you go through savings, pensions, and 401(k)s, you have to start out at zero.”

Federal Reserve officials are concerned that long-term unemployment and the need for “reallocation” away from workers’ former jobs will cause a loss of skills, hindering any pickup in hiring, the central bank said two days ago.

‘No Fuel’

“We’re in a situation where we can’t have a normal recovery -- there’s no fuel for that,” said Dean Baker, co- director of the Center for Economic and Policy Research in Washington. “We’re almost certain to continue losing jobs through 2009 and possibly into 2010.”

The jobless rate in August jumped to 9.7 percent, the highest since 1983, from 9.4 percent, and employers cut another 216,000 jobs, according to a Labor Department report today.

The economy has lost 6.9 million jobs from the start of the recession in December 2007, the most of any downturn since the Great Depression.

In addition to the 14.9 million Americans who were unemployed in August, 9.1 million were forced to settle for part-time jobs because they couldn’t find full-time work, according to Labor Department data. Another 2.3 million were classified as “marginally attached,” or available for work but hadn’t searched in a year.

When the underemployed and marginally attached are included with the unemployed, the so-called rate of underutilization was 16.8 percent in August, seasonally adjusted.

Delivering Pizza

For Dante Shafala, a graphic designer with 20 years of experience, underemployment means making deliveries for Domino’s Pizza Inc. in his BMW 325I convertible.

“Sitting around the house was just killing me,” said Shafala, a 41 year-old resident of Emeryville, California. “There’s nothing out there for people with experience. Everybody’s looking for entry-level people.”

Fed officials had “particular concern” about the state of the job market when they met Aug 11-12, minutes of the Federal Open Market Committee gathering showed this week. They “expected no more than moderate growth in consumer spending going forward,” the minutes said, even after the deepest consumer retrenchment since 1980.

As competition for available jobs intensifies, wage growth is slowing. Average hourly earnings rose 2.6 percent in August from a year earlier, the smallest increase in more than four years, to $18.58.

‘Weak’ Income Growth

“The large number of unemployed and underemployed people means that income growth remains quite weak,” said Charles McMillion, president & chief economist of MBG Information Services in Washington, who studied the labor market for more than 30 years. “The best we can hope for is a tough slog that is stable and doesn’t fall back into a recession next year.”

Rising unemployment hasn’t stopped some analysts from projecting a jump in gross domestic product this quarter. Morgan Stanley analysts estimate at least a 4 percent annual gain, led by a manufacturing rebound and leveling out in home construction.

In California, where Alvarez lives, the unemployment rate rose to 11.9 percent in July, the highest since records began in 1976, according to the U.S. Labor Department.

Alvarez said her one-month job at the L.A. County Fair will help make ends meet as she looks for another job and builds her own business as a direct seller of automotive-fuel treatments, which she says has the potential to bring in $10,000 a month.

The temporary stint -- finding potential customers for a home-landscaping company -- will pay $12 to $15 an hour, half of what she earned in her last full-time position.

Long-Term Unemployed

Alvarez is among the almost 5 million Americans classified as “long-term unemployed” -- those who have been seeking work for more than 26 weeks. She has gone through all her savings, and said her $200 weekly unemployment benefits ended in August. She has sent out hundreds of resumes.

She said she spent 12 years as a computer-network administrator at companies such as Cox Communications Inc., now Cox Enterprises Inc., and TransWestern Publishing Co., which Yell Group PLC acquired in 2005.

“I’m still cutting back,” Alvarez said. “Things can only get better. The only way they can get worse is if I don’t go out and do anything.”

To contact the reporter on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.net

Last Updated: September 4, 2009 10:08 EDT