Although the economic recovery is expected to gain traction in the quarters ahead, labor market growth still continues to lag the pace of previous recoveries. One of the most glaring examples of the sluggish labor market recovery is the high level of long-term unemployed (see Figure 1). Despite the sharp rise in the long-term unemployed, employers are having difficulty filling open positions with qualified workers. Many of these open jobs are considered professional/high-skill and require some post-secondary education or high level of expertise. At the same time, many of the workers who are long-term unemployed don’t qualify for the jobs that are in high demand. What is driving this mismatch in the number of people who want to work and the number of jobs that are available for their skills?
Special Commentary
Do You Have The Skills To Pay The Bills?
Executive Summary
Although the economic recovery is expected to gain traction in the quarters ahead, labor market growth still continues to lag the pace of previous recoveries. One of the most glaring examples of the sluggish labor market recovery is the high level of long-term unemployed (see Figure 1).1 Despite the sharp rise in the long-term unemployed, employers are having difficulty filling open positions with qualified workers. Many of these open jobs are considered professional/high-skill and require some post-secondary education or high level of expertise.2 At the same time, many of the workers who are long-term unemployed don’t qualify for the jobs that are in high demand. What is driving this mismatch in the number of people who want to work and the number of jobs that are available for their skills?
Some of this increased demand for professional/high-skill workers is due to productivity gains as firms utilize new technologies and take advantage of low-cost labor overseas. The manufacturing industry is a prime example of a sector that has seen robust gains in labor productivity growth (see Figure 2). Over the past two decades, output per hour in manufacturing more than doubled. Due to the spike in manufacturing labor productivity, many of the open positions in this sector are technical and without retraining, production workers must transition to another industry which could take a considerable amount of time. The imbalance in the supply of unemployed workers and employers hiring demands is largely a short- and medium-run issue. In the long run, new entrants into the workforce and prime-age workers who currently do not qualify for jobs in high demand will likely obtain a higher level of education or take the time to retool their skills. That said, this paper looks at what can be done to address the current skills gap.
This report is available on wellsfargo.com/economics and on Bloomberg WFRE.