Why aren’t jobs returning?
Many economic indicators have improved over the last year, but one that has trailed in gains has been jobs. Why is that? N.C. State University economist Mike Walden responds.
“Well, first of all, … we have added jobs. In fact since the bottom of the recession nationwide, we have added about a million jobs and in North Carolina we have added about 25,000 jobs. But of course, that is far from recovering the 8 million jobs that we lost during the recession in the nation and the 300,000 jobs that we lost here in North Carolina during the recession.
“Economists think there are three reasons why we are slow to see jobs come back:
Number one, businesses want to be absolutely sure the economy is back before they add jobs. Adding people to your workforce is a very expensive and very important proposition. Any businessperson wants to make sure that they will be able to continue using that person. Businesses don’t like to hire and then fire over a short period of time. So uncertainty about the future economy has been holding back jobs.
And secondly during recession businesses find ways to get more work out of fewer people. That’s called labor efficiency. And we always see labor efficiency go up during recessions. Now the problem is that continues, then, into the recovery. So businesses likely aren’t going to need the same number of people that they had prior to the recession.
And then thirdly — and I think this may be the most important reason — what we are finding is that many people who are now unemployed (some estimates, fully half of them) simply don’t have the skills that businesses now need. So we have a massive retraining program — retraining proposition — that we need in the country to get those folks back to work.”Category: Economic Perspective