By Foroohar, Rana
Newsweek , Vol. 156, No. 14
Byline: Rana Foroohar
Hint: they're not where the workers are.
It's official. The Great Recession that began in December 2007 ended in June 2009, making it the longest on record since the end of World War II. That was the news flash last week by the number crunchers at the National Bureau of Economic Research, the outfit up in Cambridge, Mass., in charge of marking such sober events. Economics is a science that is not just dismal but frequently late, meaning that even as it took more than a year to figure out that the recession was over, it will now take many more to discover definitively what caused it and, more important, to ferret out why unemployment still remains at historic highs even as the economy is growing once more.
Answering this question is the key to American prosperity over the next decade. Some conservatives squawk that unemployment isn't budging from 9.5 percent because of higher-than-usual benefits being paid out to jobless workers, or the fact that wages haven't come down as much as they should have, given how many people are out of work. But statistics show that more unemployment insurance and things like COBRA health coverage (which were often unavailable in recessions past) have a small effect on the jobless rate. A more likely problem is that there's a serious mismatch between jobs and workers. A new report by London-based Capital Economics says that supply problems--the workers who need jobs are in the wrong states, and the wrong fields--could be responsible for nearly a third of America's unemployment rate.
In most recessions over the last half century, job losses were broadly spread throughout the economy. This time three fields--construction, manufacturing (particularly in the automotive sector), and finance--have been hit much harder than others. Meanwhile, other sectors of the economy are growing strongly--including health and education--but they can't find enough workers, in part because wages have historically been too low to attract new talent. While that mismatch may help teachers and nurses negotiate better pay packages, it won't help bring down unemployment rates among builders and machinists.
What's more, America's much-heralded labor flexibility has taken a hit because of the housing crisis. …