The severance package is supposed to shoulder the financial shock of unemployment. However, for many laid-off workers, it also provides a false sense of security. Take the example of Paul Joegriner. Since he was laid-off as CEO of a small bank in March 2008 and with it his $200,000 pay was gone, he hasn’t worked since. His lifestyle including that of his family remains in comfort though due to savings and the severance pay.

He has been offered several jobs, all below what he used to earn. He decided to decline in the hope of landing something better. Mr. Joegriner, along with countless others in the US, may be classified as members of what is described as the “severance economy”. These are the individuals who used their severance pay to maintain their old lifestyles. Most lost their jobs in 2007 and 2008. Up to now, many remain unemployed.

Michelle Patterson was working for a publishing company when she was laid-off in January. However, she wasn’t concerned at the start because she has $20,000 from savings and severance combined. Eating out, drinking coffee at Starbucks, and paying for beauty treatments inevitably took a tool on her finances. A few months later, there still wasn’t any work, her condo already in the market for six months had no buyer, and her money is almost gone.

Like Mr. Joegriner, she had to take drastic cuts on her spending. Ms. Patterson doesn’t go to fancy salons anymore neither does she go to Starbucks every day. Similar to others in her situation, she doesn’t find it easy to adjust from a $140,000 to unemployment. However, Ms. Patterson muses that she should have cut her spending earlier.

Lawmakers have extended unemployment benefit for up to 20 weeks but t is expected to run out by the end of the year. 1.3 million Individuals are still depending on it. In addition, companies have trimmed severance packages from 21.8 weeks to 12.5 weeks salary. Some are even eliminating it altogether. Certain sectors including the auto and the financial industry have borne the brunt of the damage. Changes in the industry may mean that the eliminated jobs will not come back; the standard of living of its workers might take a permanent hit.

Most Americans would never have thought it would come to this. The human toll of the recession is still increasing even as the economy shows signs of improvements. Millions of people remain out of work, with their unemployment benefits nearly running out. As majority of these individuals no longer have any savings to speak of, they are staring poverty in the face.

Strains on the Social Safety Nets

Analysts believe that the recovery will not be strong enough to uplift the long-term unemployed. They fear that more Americans will be left behind in this recovery compared to past recessions. These individuals might be classified into a new category: the new poor. They have long been accustomed to middle class life because of their previous employment. Now, they are relying exclusively on public assistance to see them through.

However, even the social safety nets in place are showing severe signs of stress. The unemployed may potentially rely on public services for years to come unless their situation improves. It is estimated that 2.7 million people will lose their unemployment checks by April unless it is extended. Without it, social organizations will be strained under the weight of its responsibilities.

Another disturbing figure is that the number of individuals unemployed for six months or longer is at its largest since 1948, when the government started tracking. They are now composed of 6.3 million people. Men have suffered the brunt of the recession. However, women between the ages of 45 to 64 were also severely affected.

Scarcity of Jobs

The scarcity of jobs even during recovery can be attributed to a range of factors. Some are already embedded in the modern economy. Majority of large businesses are now owned by institutional investors looking for fast profit, usually done by shedding staff. In addition, the manufacturing and some white-collar work have been outsourced to Latin America and Asia. A lot of companies are also hiring temporary staff and part-time workers.

Economic recessions usually forces people out of the middle class. Once recovery starts though, most will recover. In today’s case though, economists think that it will be difference. The economy will need to generate at least 100,000 new jobs in a month just to absorb new entrants. But with over 15 million people officially jobless right now, even a vigorous recovery will leave most unemployed.

Having career problems is nothing new but the issue is exacerbated by the pressures from the economy and difficult business environment today. So people who are discontented with their job and how their career is going are instead counting themselves lucky that they’re not one of the millions that fall under the unemployed category.

Whatever your situation is right now, there is still comfort in knowing what the future has in store. In 2010, industry experts predict that the following will happen:

Wild Card – While everything looks on track economically, changes in critical industry such as oil and gas can change things quickly. If energy prices increases sharply this year, business and consumer spending will be affected. In turn, pay freezes and hiring freezes are likely to occur.

Expansion in Some Industries – The same fields that held stable during the recession will expand in 2010. Some industries include education, healthcare, and technology. This may help raise the salaries of workers within these sectors.

It is also important to watch out for the average weekly work hour your employer requires from you. When the crisis hit, a lot of employers decided to work hours instead of laying-off people. If this is the case for you, watch out for a boost in your working hours. Once this happens, the company will soon increase your pay or start hiring again.

In the meantime, be sure to do what it takes to keep your job. This is because unless you have a highly in-demand technical skill, everyone is a lay-off target. Ensure that your position is cemented by “flying above radar.” Gone are the days when simply working hard and minding your own business is good enough. Now, visibility is the key. Excel in what you do and let others know that you’re good as well.

Previously, we talked about how America’s middle-class is becoming “extinct” due to debt, unemployment, and the financial crisis. Well, the Obama administration doesn’t want to go down without fighting. Several initiatives have been launched to bring peace of mind back to the middle and even lower-income segment.

These programs won’t actually do much for the unemployed and its contribution to the economy may be negligible. Whatever the case, it may be a beacon of hope for struggling American families who just about had it. Among the programs introduced during the State of the Union address include:

Cap on Student Debt

It is no secret that even professionals in a cushy job are struggling with student loan repayments. Student debt is a big problem because college graduates are burdened with thousands of dollars to be repaid as soon as they step out from school. Statistics suggest that two-thirds of American graduates carry an average student debt of $23,000. Obama’s plan seeks Congress’s approval to limit their monthly payment to 10% of their discretionary income.

Child Care Tax Credit

This type of tax credit is nothing new to the American public. But President Obama is encouraging Congress not only to expand the number of households covered but also to almost double the tax credit of individuals eligible for it. Under the proposal, households with an income of $85,000 or less annually can get 35% credit for their expenses (up from the current 20%). It may be the push that stay-at-home parents have been hoping for. The child care tax credit will encourage them to join the labor market again.

Automatic IRA Deposit

Employers who don’t have a retirement program in place can start individual retirement account for each of their workers. Small businesses and their employees will be the main beneficiary of this initiative. Making it easier to contribute will be a bonus for people who currently don’t have money for retirement.