Americas Employment and Unemployment Crisis

There is a great and pernicious irony going on today in the American economy (not the only pernicious irony, most likely) concerning the great gulf between available job openings and "unemployable" laid-off workers. This schism is a harrowing litmus test -- or stress test, being the popular term of late -- concerning our continuing slide into an economic void filled with spiking and dropping figures on a number of levels.

During the worst recession this country has seen in generations, there are 13 million people out of work, with 3 million job openings.

Try as recruiters might, they have, for some mysterious reason (which we will get to the heart of later on in this article), been unable to fill these 3 million job openings. That's more people than live in the city of Chicago proper. This figure is even more disconcerting than it first appears.

To put it bluntly, this is evidence of a sudden and tremendous shift in the US economy which has presented serious mismatches between workers and the available positions out there. Workers pink-slipped from such shrinking work sectors as construction, finance and retail largely lack the skills and training for jobs in growing fields such as education, accounting, health care and government. Concurrent with this trend is the worst housing bust in decades, which has left the unemployed frozen in place, due to the fact that they cannot move to get work because they can't sell their homes.

As bad as it is now, this severe mismatch will create bigger problems when the economy begins expanding again. First, the unemployment rate is likely to remain disturbingly high because many people who want jobs will lack the necessary qualifications. Second, inflation might pick up sooner than expected if employers are forced into bidding wars to recruit the few people who actually are qualified for the work. Additionally, if the unemployment rate remains high, it will put extra political pressure on Congress and the Obama Administration to put through quick-fix measures that could make matters worse in the long run, such as the return to a welfare state mentality, the cost of long-term unemployment benefits acting to deter recipients from being as "gung ho" on the job hunt as they normally would be.

Another danger is that the US labor market will inevitably become less flexible at a time when Europe's labor market is finally normalizing again. To stave off that situation, both employers and governments alike will need to step retraining, if not flat-out subsidize the career advancement of its loyal workforce. In the meantime, workers and employers will have to accept harsh new realities, translated into lower pay for those starting new careers, and less than perfect fits for companies filling vacancies. All in all, an unsavory prospect at best.

The US economy has changed drastically over the pat couple of years. faster, it seems, then the workforce can adapt. The Bureau of Labor Statistics offers a recent sobering report, which makes these realities more evident. In their JOLTS, or Job Openings & Labor Turnover Survey, there is a statistic called the job openings rate, which is the percentage of all jobs in the US that are unfilled -- an employer must be actively recruiting on the outside for the opening to be counted. On the last day of February 2009, 2.2% of all US jobs were open, 3 million all told. This figure is corroborated by the Conference Board's report of 3.2 million online advertised job openings as of March.

The JOLTS rate is down from 3% in February 2008, even though the surplus of unfilled jobs is smaller now than it was at the outset of the current recession. But, some decline is to be expected, though the surprise is how many unfilled positions there still are, given that, in the very same year, the unemployment rate shot up from 4.8% to 8.1%. And, just as the unemployment rate measures problems in the labor market from the workers' perspective, the job openings rate calculates the difficulty factor for employers trying to fill open slots. While economists generally focus on the unemployment rate, in many ways the job openings rate is equally significant.

Business Week magazine recently constructed a new measure called the "jobs misery index" in order to get a more complete picture of the labor market crisis. It's simply the sum of the unemployment rate and the jobs opening rate. This sum held at a stable 8% for years, including during the 2001-02 recession. Starting last spring, however, it began a steep ascent to more than 10%. The question is whether it will return to the 8% range when the economy "recovers", or remain high for years to come.

One reason the jobs misery index is so high is the housing bust has reduced Americans' mobility in a big way. The Census Bureau reported on April 22 that the percentage of the population that moved residences in a reporting period was the lowest since record keeping began -- in 1948. The Census found that homeowners were only one-fifth as likely to move as renters. The bright side of this scenario is that there remain pockets of persistent unemployment, such as North Dakota, which the 4.2% unemployment rate is the nation's lowest. Sykes Enterprises, for instance, plans on clsing a 200-person call center in Minot, ND on May 10 for lack of workers. Fast food restaurants there are putting workers on overtime to cover shifts. Could it be people are escaping to better opportunities? Low population in North Dakota?

Immobility sometimes comes down to being a matter of choice. Case in point: Dean Drako, CEO of Barracuda Networks, a security and network appliance company, has been hunting for months for a vice president of worldwide sales, as well as for other key positions. He gave up a coveted Friday night with his family recently, in order to attend a San Francisco mixer heavy on Ivy League job hunters at the posh University Club. Certain he could capture some interested talent, Drako handed his business card to a prospect who'd been jobless for six months. The person looked at Barracuda's Campbell, CA address and retorted "Oh, forget it, your location is undesirable."

Even those from such hard-hit cities as Detroit and Cleveland have passed up well-paying jobs with medical device firms in places like North Carolina, simply because they don't want to - or can't - move. Where moving isn't an issue, employers are nonetheless miffed by the difficulty of filling jobs when so many are out of work. Ask one Irina Lutinger, who is near her wits' end trying to hire laboratory workers at NYU's Langone Medical Center in Manhattan. The senior administrative director for clinical laboratories says 10% of the unionized jobs are unfilled, greatly slowing down patients' lab work. Lab techs earn from the mid-$40,000 to the high $60,000 range a year, with good medical benefits and four weeks of vacation. Is that attracting career switchers who want to get retrained and take the licensing exam? "We haven't seen it yet here," answers Lutinger.

Labor advocates don't buy the argument that the US is suffering worker shortages. They say employers simply aren't willing to pay enough to attract the right workers. The shortage of primary care physicians that President Obama has been talking about would likely work itself out if primary care doctors were paid anything close to what specialists get. Higher pay is no panacea, however.

Some jobs require specialized skills for which no amount of money will generate higher labor supply until a new generation can be trained. The demand for accountants, for example, is likely to stay strong even after the current financial crisis is abated. As for now, "the restructuring business, bankruptcy attorneys...they are incredibly busy. And it's not as if you can all of a sudden invent these people," says Brian Sullivan, chairman and CEO of CT Partners, a New York-based executive search firm.

Wall Street giant IBM is feeling the heat of the skills mismatch problem as it changes its focus to services and data analysis. On April 28, 2009, "Big Blue" announced plans to add 4,000 specialists in analytics. It is spending some of its $1 billion-a-year training budget retraining as many of its current employees in hopes of retaining as many of its workforce as possible. But IBM is still laying off thousands of people who simply have no place in the "new" company, sadly.

Good help can be hard to find at the bottom end of the pay scale as well. In Maryland's Dorchester County, where the jobless rate is a whopping 11.5%, crab processors are trying to fill 300 jobs that pay $6.71 to $14 per hour depending on how fast people can pick meat from crab shells. Most of the work is done by Mexican women on temporary work visas. Crab companies held a job fair in early April, but only two locals applied. "People don't want to go back down the economic ladder," says Bill Sieling, executive director of the Chesapeake Bay Seafood Industries Assoc.

Some light at the end of the tunnel: Obama's stimulus package improves US jobless benefits, though while justifiable on humanitarian grounds does make workers less eager to jump at the first, less ideal job offer. The housing bubble implosion has severely decreased mobility of unemployed workers. And the sheer length of the current recession is making jobless Americans less employable, says economist Laurence M. Ball of Johns Hopkins University. To fight against this lassitude, Uncle Sam is using $3.5 billion of the stimulus for training purposes, while boosting support for community colleges. Classes for factory workers seeking entry-level health care careers have shown some success.

The cold, hard truth is displaced workers may have to move down a few rungs on the job ladder as they adjust, switching to new careers because their skills are now irrelevant in their new roles. Many laid-off Wall Street financial strategists still haven't absorbed that fact. Says Fred Wilson, a partner in Union Square Ventures, a New York venture capital firm, "For them to take a job that pays much less, they have to make a meaningful change in their lifestyle, and that is an issue."

Employers need to bend a bit as well, and be able to recognize that the candidates they're seeking may not exist at all. More and more staffing consultants are telling employers that they must step up to the plate and implement proper training -- and retraining -- programs, which will only serve the best interests of employees and employers alike. Smart policies that take a realistic approach to the current macrocrisis of the mismatched working millions facing disappearing or changing jobs seem to be the only foreseeable short-term answer to our economic woes. Washington needs to also step up concurrently, and regulate the mess that deregulation, overseas exporting of manufacturing jobs, and pure and simple greed have gotten us into in the first place.

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