Structural Shifts in the Labor Market

by: Mark J. Perry

This city is grappling with one of the most troubling contradictions of the new economy: Even as it has one of the nation's highest unemployment rates, it has thousands of job openings.

The dilemma is becoming more common across the country as employers report increasing numbers of job openings (see chart above). But many of those jobs are not a good fit for those who are out of work. The reason, economists say, is that the recession accelerated the decline of some industries, such as housing construction, as others that require far different skills, including health care, emerged stronger. Some economists predict that this disconnect is likely to grow as the economy develops jobs that require more training.

2. Wall Street Journal

U.S. companies have commitment issues. Since the labor market hit bottom in December 2009, 27% of the 1.1 million jobs added have been temporary ones—triple the ratio of temps hired after the last recession ended in 2001. That could be great news for the labor market, since companies typically hire temps before expanding permanent staff. Or it may illustrate a shift in the U.S. work force.

Although the 27% ratio of temps hired since December 2009 might be higher than in 2002, that might be only because the ratio of temporary-to-total private sector jobs fell to a lower level in 2009 than in 2001 (see chart). As a percent of total private jobs, the 2.04% in December 2010 is about the same as the 2002-2003 post-recession period.

Taken together, there probably will be two structural shifts in the labor market moving forward: a) increases in labor demand that won't necessarily match the skills of the currently unemployed workers, meaning that many of those unemployed will need re-training and more education to gain the skills required by employers in 2011 and 2012, and b) increased reliance on contract, temporary and freelance workers going forward, to give companies greater flexibility in their workforce and staffing needs.