Why are jobs coming back slowly?
We lost almost 8 million jobs in the country during the recession. To date we have regained less than 1.5 million jobs. At this rate it will be another three years before total national employment returns to pre-recessionary levels. Why is the job recovery taking so long? N.C. State University economist Mike Walden explains.
“I think there are three fundamental reasons: One is lack of business confidence about the future economy. For a business to go to the expensive and time-consuming proposition of hiring new workers, that business has to be convinced that the economy is back. And that has been a big issue really, since the small recovery has begun. Now I think this is changing. Measures of business confidence show that it is coming up, so hopefully that will contribute to bigger job gains.
“Second reason is labor productivity. Labor productivity always goes up during recessions. Businesses find ways to get more out of their workers; therefore, they don’t need as many workers. And that carries through to the economic recovery. Now that will run its course, but clearly the fact that worker productivity is higher has held down the rate of hiring.
“And then the last factor, I think, is the most important. That is, we have a skill and geographic mismatch in our country. We have people without the right skills for the jobs that are being offered. We also have people that have the right skills but they are in the wrong place in the country for the jobs that are being offered, and they haven’t moved because of the housing market.
“So that is probably the most important factor, and one that is not going to be solved for a long time because it requires a turnaround in the housing market as well as changes in education.”Category: Economic Perspective