According to the US Bureau of Labor Statistics (BLS), the nation’s businesses added 243,000 new jobs in January 2012 in a broad array of industries. The biggest job creators were in manufacturing, transportation, warehousing, professional and business services, and leisure and hospitality sectors of the economy. On the other hand Government agencies at all levels—federal, state, and local–laid off workers because of budget deficits. This was the fastest pace of monthly job growth since April 2011. The best news is that businesses remained the engine of job growth.
The U.S. unemployment rate now is at 8.3 percent compared to 8.5 percent in January 2012. (In August 2011 it was at 9.1 percent). The good news is that according to the BLS the unemployment rate is falling because people are actually securing new jobs rather than leaving the work force. However, the unemployment picture still remains troubling despite recent improvements. The number of unemployed workers has been declining because of recent job gains in past several months, but the total jobless number remains a painful 12.8 million people. This is the most painful legacy of the great recession of 2007-2009, the worst since the great depression of the 1930’s.
The current long-term unemployment problem involving 5.5 million workers, representing over 40 percent of the jobless, who have been unemployed for more than six months is serious and is unlikely to be solved via increases in demand for workers alone. It involves major structural problems in the American economy.
The biggest structural issue is the skills gap, and the gap is particularly severe in the STEM (Science, Technology, Engineering, and Mathematics) area. Other structural issues include disappearance of many jobs as a result of continued improvements in productivity as well as off-shoring of jobs to booming emerging economies that in many cases have lower labor costs as well as well skilled labor force, e.g. China and India. (For details see my book with coauthors Mary Walshok and Henry Devries—Closing Ameica’s Job Gap.)
Many who have lost their jobs in the recent economic disaster do not have the skills and training required for the openings. In addition, those who have the skills do not move to a new area because of reduced mobility. They either cannot sell their homes in a down real estate market or do not want to move to another location because of family and other personal reasons such as loss of friends and community.
There is a serious mismatch in our labor market and it is not easy to solve. The labor force is having great difficulty in adapting to the rapid structural changes in the economy brought on by rapid technological changes and the rapid demise of old jobs. There are also unrealistic expectations of many who have taken for granted that even in a rapidly changing world they will hold on to a specific job for their lifetimes. Today many skilled workers refuse to accept slightly lower paying jobs and prefer to remain unemployed in this tight labor market.
It is quite possible that some of the unemployed who are unwilling to move to another location may do so by the inducement of higher compensation. But higher pay is not always the answer, as there are clear-cut skill gaps in many cases.
The long term issue of structural unemployment, particularly in the STEM area, can be solved if we face up to this serious challenge instead of avoiding it or pretending that it does not exist. If we continue to avoid this issue we will continue to experience higher levels of unemployment than necessary for quite some time. We deserve better. I have discussed this issue at length in my forthcoming book – —Innovation:Key to America’s Prosperity & Job Growth.
Let me conclude this column by saying that the jobs data for the last six months has been encouraging.We still have a long ways to go lower the unemployment level.
Perspectives on the Economy 