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J U N E 2 0 1 1

The growing US jobs challenge

It could take more than five yearslonger than after any postwar

downturnto replace the millions of jobs lost to the 200809

recession. How can the US rev up its job creation engine?

m c k i n s e y g l o b a l i n s t i t u t e

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The 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 200809 recession. To

regain full employmentnding work for the unemployed and accommodating the 15

million Americans expected to enter the labor force this decadethe 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 Americas 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.

Among the most important ndings:

The United States has suffered from increasingly lengthy jobless recoveries following

recessions during the last two decades. From 1945 to the 1980s, it took roughly six

months after GDP rebounded for employment to recover. But after the 199091 and 2001

recessions, it took 15 and 39 months, respectively. At the recent rate of net job creation,

more than 60 months will be needed to replace the jobs lost in the 200809 recession

(exhibit).

Six economic sectors will account for as many as 85 percent of all new jobs in

this decade: health care, business services, leisure and hospitality, construction,

manufacturing, and retailing. The rst three will have a disproportionate inuence on

the total number of jobs generated. Business services, for example, could create as many

as 5.7 million of them or as few as 2.4 million.

Assuming current trends, the United States will not have enough workers with the right

education and training to ll the jobs likely to emerge. By 2020, there will be up to 1.5

million too few college graduates to meet demandand 5.9 million more Americans

without high school diplomas than employers can use.

At all levels of postsecondary education, Americans are not getting the job ready skills

that employers say they require. In our survey, 40 percent of the executives whose

companies plan to hire next year said theyve had unlled openings for six months or

longer because they cannot nd qualied applicants. The skill gap goes beyond the well-

known shortages in technical elds; there are growing shortages of welders, nutritionists

nuclear technicians, and nursing aides, employers say.

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Technology is changing the nature of work in ways that create challenges for US

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

Longer . . .

. . . and deeper

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.

Months elapsed between return of real GDP to prerecession peak and

return of employment to prerecession peak1

39

15

6

3

8

6

6

7

6

1981

1990

2001

2008

1957

1960

1948

1953

1969

1973

>60 months

Projection, based on recent

rates of job creation

% decline in employment from prerecession peak,

in months since recession began

2008 recession

Lowest point: 6.34%

0 12 24 36 48

1Returns to prerecession peaks are established by start of more than 1 quarter above prerecession levels; US recessions arelabeled by beginning year, with the exception of the most recent. The National Bureau of Economic Research estimatesthat 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

Previous

recessions

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The United States will not return to full employment by following a business-as-usual

course; a strong economic recovery will be a prerequisite but is unlikely to be sufcient. To

meet the jobs challenge, business and government leadersand workers, toomust attack

the obstacles to employment and have the courage to consider new approaches.

Our analysis identied four areas where progress must be made: ensuring that Americans

have the necessary education and skills for the jobs created; seeing to it that global

investment generates jobs in the United States; encouraging innovation, the creation of

new companies, and the scaling up of new industries in the United States; and clearing the

way to growth by making compliance with regulations less onerous.

Read the executive summary or download the full report on the McKinsey & Company

Web site.

Copyright 2011 McKinsey & Company. All rights reserved.

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