Bloomberg News

Shortage of Educated Workers Boosts U.S. Joblessness

August 29, 2012

Mismatches in supply and demand for educated workers boost U.S. unemployment and add as much as 2 percentage points to the jobless rates for some cities, according to the Brookings Institution.

Cities with larger gaps in education levels between workers and available positions have lower rates of job creation and new openings, the institution’s Jonathan Rothwell said in a report published today. San Francisco, Washington and San Jose, California, have the most demand for college graduates, according to the report.

“It’s harder for employers to fill open positions if they’re in metro areas with a low-educated workforce,” Rothwell said in an interview. “There are very few job openings available for workers with less education. We need to create more openings for middle-to-lower educated workers.”

Jobs in the 100 largest metropolitan areas require more education than the workforce can provide, according to the analysis of online employment postings, occupations and educational attainment from January 2006 to February 2012. A bachelor’s degree or more is required for 43 percent of jobs, while 32 percent of adults ages 25 and older have attained that education level, according to Rothwell, a senior research associate at Washington-based Brookings.

“Metro areas with the most highly educated workers relative to demand also have the lowest unemployment rates for both less educated and less experienced workers,” Rothwell wrote. “Opportunities for those with the least education are often in the metro area labor markets with the most education.”

Pittsburgh ‘Resilient’

Pittsburgh has the most recession-resilient labor market, based on education gap, house price trends and industry growth, according to the study. Its greatest strength is in housing prices, which rose 7.3 percent since 2006, even as prices dropped by 15 percent in the average large metro area, the study said.

The California metro areas of Sacramento, Riverside, Bakersfield, Stockton, Fresno and Modesto accounted for six of the 10 least resilient metro areas in the nation. The Miami-Fort Lauderdale-Pompano Beach region was least resilient.

Education gaps pose a “longer-run challenge for many regional labor markets” because they account for about two- thirds of the variation in the level of unemployment across metro areas, Rothwell wrote.

San Jose, located in Silicon Valley, where many of the world’s largest technology companies are based, had the highest level of demand for highly educated workers, according to the study. Some 56 percent of openings required at least a bachelor’s degree in the area, while only 36 percent of existing positions required such credentials, the study showed.

Apple, Google

Apple Inc. (AAPL:US), based in San Jose’s neighboring city of Cupertino, became the most valuable company in history this year, topping $633 billion (AAPL:US) as the shares soared 67 percent (AAPL:US) on demand for iPhones and iPads. The Valley also is home to Google Inc. (GOOG:US), Intel Corp. (INTC:US), Cisco Systems Inc. (CSCO:US) and Hewlett-Packard Co. (HPQ:US)

Fewer than one-third of openings in cities such as Cape Coral, Florida and Youngstown, Ohio required a bachelor’s degree, highlighting the variation among the largest cities.

Occupations that had high demand for workers were also the ones that sought employees with more education, Rothwell said. Computer jobs, in which 63 percent of workers have at least a bachelor’s degree, were the most heavily advertised online, followed by health practitioners, a profession in which 71 percent have that level of education, the analysis showed.

Higher educational attainment also benefits cities by making workers more employable and entrepreneurial, leading to more job openings for less-educated workers as new businesses hire, the report said.

More Entrepreneurship

“Given that more than half of new jobs typically come from establishments started within five years, the lack of openings implies a need for more entrepreneurship,” Rothwell wrote.

The study sheds additional light on a debate among Federal Reserve policy makers over the causes of unemployment stuck above 8 percent for more than three years. The debate centers on whether the jobless rate is high because of a lagging economic recovery, which can be influenced by monetary policy, or because of a mismatch between worker skills and the needs of employers, a structural problem that the Fed can’t solve.

Fed Vice Chairman Janet Yellen, in a June speech, said she viewed the “bulk of the increase in unemployment since 2007” as cyclical and went on to say that “a highly accommodative monetary policy will remain appropriate for some time to come.”

While unemployment rates are elevated mostly because of the declines in home prices and consumer spending caused by the longest and deepest recession since the Great Depression, education gaps explain most of the unemployment in cities that’s considered structural, the Brookings report said.

More Employable

“Unemployment rates are unlikely to come down to their pre-recession levels” without improvement in housing and consumer spending, Rothwell wrote. “High educational attainment is essential for the health of metropolitan labor markets before, during, and after recessions. Educational attainment makes workers more employable, creates demand for complementary less-educated workers, and facilitates entrepreneurship.”

Pittsburgh’s economy got a boost because it’s home to a concentration of jobs in health care and education, which were the only major industries with consistent growth throughout the recession and recovery, the report said. The Pennsylvania city, once the U.S. steel industry’s capital, has a 7.3 percent unemployment rate, a percentage point below the U.S. rate, according to Labor Department data.

Job growth in Oklahoma City, which has the lowest unemployment rate of any large U.S. city, got a boost from hiring by mining, oil, and gas companies as energy was one of the few sectors to fully recover to pre-recession employment levels. Oklahoma’s capital had a 5 percent jobless rate in June, according to the Labor Department.

About two-thirds of the nation’s population lives in the 100 largest metro areas, according to Rothwell.

To contact the reporters on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net; Aki Ito in San Francisco at aito16@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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