The good news is that strengthening corporate profits has led to in increased business investment in technology (specifically equipment and software). Despite that, we're two years into the recovery and we've added only 1.8 million net new jobs. The question remains: will we ever return to a relatively normal rate of unemployment?
The U.S. unemployment rate currently stands at 9.1 percent. When accounting for the underemployed and discouraged workers, the situation is considerably worse than its sounds. The average duration of unemployment has reached a whopping 40 weeks, while nearly half of those unemployed have been out of work for 27 weeks or more.
Most economists figure that unemployment is about three-fourths cyclical and one-fourth structural. But I'd argue that key structural challenges have yet to be addressed.
Breaking down unemployment rates by educational attainment tells the most compelling story with respect to the jobs-skills mismatch. According the latest BLS data, the unemployment rate for those with a bachelor's degree was merely 4.5 percent. But it's more than double that (9.5 percent) for those with only a high-school diploma. That gap was even larger last May.
Globalization and technological advances have created an unprecedented demand for high-skilled labor as companies seek innovative ways to do more with less. A quick look at the BLS Job Openings and Labor Turnover Survey (JOLTS) survey reveals that since early 2010, growth in hiring has not kept pace with growth in job openings, typically an indication of a skills mismatch.
It appears that over the years, the gap between knowledge workers and the low-skilled has widened. Until we start retraining displaced workers, the situation will remain dire. Funding such an effort will be tough in an era of battered state and federal budgets, but an effective plan must be implemented.
Government may be resorting to cuts in education funding, but there's no reason why the private sector couldn't be more proactive in working with local community colleges or other nearby academic institutions to provide training programs for displaced or lower skilled employees. The President's "Skills for America's Future" initiative aims to do exactly that. It aims to create industry partnerships with community colleges to develop skill sets that are tailored to companies' real needs.
One good place to start would be in health care. As our population ages, the demand for nurses, radiologists, and other medical IT occupations will be greater than ever. We'll also need skilled workers to address key areas of U.S. energy and transportation infrastructure. Supporting education tailored to these needs will be critical to enhancing America's high-skilled labor force.