The Growing US Jobs Challenge - The McKinsey Quarterly - June 2011

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It could take more than five years--longer than after any postwar downturn--to replace the millions of jobs lost to the 2008-09 recession. How can the US rev up its job creation engine?

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The Growing US Jobs Challenge - The McKinsey Quarterly - June 2011

  1. 1. 1J U N E 2 0 11 M C K I N S E Y   G L O B A L   I N S T I T U T E The  growing  US  jobs  challenge It could take more than five years—longer than after any postwar downturn—to replace the millions of jobs lost to the 2008–09 recession. How can the US rev up its job creation engine?
  2. 2. 2The United States  faces  a  daunting  challenge  in  creating  jobs:  at  current  rates,  it  will  take  until  2016  to  replace  the  7  million  of  them  lost  during  the  2008–09  recession.  To  million  Americans  expected  to  enter  the  labor  force  this  decade—the  US  economy  must  create  21  million  jobs  by  2020.  Only  under  the  most  optimistic  of  three  scenarios  that  the  McKinsey  Global  Institute  modeled  would  this  be  likely  to  occur,  according  to  a  new  MGI  report,  An  economy  that  works:  Job  creation  and  America’s  future.  The  study  sheds  new  light  on  how  companies  use  labor,  where  new  jobs  are  likely  to  come  from,  and  what  conditions  are  needed  to  ensure  that  they  can  be  created  in  a  sustainable  way.  In  addition  to  original  research  and  scenario  analysis,  the  report  draws  on  a  survey  of  2,000  business  leaders,  as  well  as  interviews  with  more  than  100  business  executives,  public-­sector  leaders,  educators,  and  other  experts  on  US  labor  markets.     The  United  States  has  suffered  from  increasingly  lengthy  “jobless  recoveries”  following   months  after  GDP  rebounded  for  employment  to  recover.  But  after  the  1990–91  and  2001   more  than  60  months  will  be  needed  to  replace  the  jobs  lost  in  the  2008–09  recession   (exhibit). this  decade:  health  care,  business  services,  leisure  and  hospitality,  construction,   the  total  number  of  jobs  generated.  Business  services,  for  example,  could  create  as  many   without  high  school  diplomas  than  employers  can  use. that  employers  say  they  require.  In  our  survey,  40  percent  of  the  executives  whose   nuclear  technicians,  and  nursing  aides,  employers  say.  
  3. 3. employment  levels  but  also  open  up  opportunities.  Broadband  communications   and  advanced  IT  systems  make  it  possible  to  disaggregate  jobs  into  tasks  that  can   be  reassigned  to  other  workers  in  a  given  location  or  elsewhere.  Some  work  now   performed  by  physicians,  for  example,  can  be  handed  off  to  physician  assistants  or  nurse   practitioners,  creating  demand  for  those  middle-­income  positions.  Also,  this  approach   makes  it  easier  to  “onshore”  service  jobs  to  low-­cost  US  locations  or  even  to  workers  in   their  own  homes.Exhibit Jobless recoveries: it used to take roughly six months for US employment to recover after recessions, but in recent ones that time span has increased dramatically. Longer . . . Months elapsed between return of real GDP to prerecession peak and return of employment to prerecession peak1 1948 6 . . . and deeper 1953 7 % decline in employment from prerecession peak, in months since recession began 0 12 24 36 48 1957 6 1960 6 Previous recessions 1969 8 1973 3 2008 recession Lowest point: 6.34% 1981 6 1990 15 2001 39 2008 >60 months Projection, based on recent rates of job creation 1Returns  to  prerecession  peaks  are  established  by  start  of  more  than  1  quarter  above  prerecession  levels;;  US  recessions  are   labeled  by  beginning  year,  with  the  exception  of  the  most  recent.  The  National  Bureau  of  Economic  Research  estimates   that  the  current  recession  began  in  Dec  2007.  GDP  returned  to  its  prerecession  peak  in  Dec  2010.   Source:  US  Bureau  of  Economic  Analysis;;  US  Bureau  of  Labor  Statistics;;  McKinsey  Global  Institute
  4. 4. 4Related thinking The  United  States  will  not  return  to  full  employment  by  following  a  business-­as-­usual  “Translating innovation into meet  the  jobs  challenge,  business  and  government  leaders—and  workers,  too—must  attack   US growth: An advanced- industries perspective” the  obstacles  to  employment  and  have  the  courage  to  consider  new  approaches.  “Why US productivity can grow without killing jobs”“How US multinationals drive economic growth” way  to  growth  by  making  compliance  with  regulations  less  onerous.  “The economic cost of the Read  the  executive  summary  or  download  the  full  report  on  the  McKinsey  &  Company   US education gap” Web  site. Copyright © 2011 McKinsey & Company. All rights reserved.

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