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Unemployment, Inc.: Six reasons why America can't create jobs

UPDATE: No net growth in new jobs in August kept the US unemployment rate at 9.1 percent. Six reasons the country is struggling to put people to work – and why it may not last.

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Yet many forecasters argue that deep "structural" changes in the economy, some of them dating from before the recession and now amplified by it, also are dampening employment. The forces range from a significant skill gap among unemployed workers to shifting approaches to staffing by employers.

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"This recession marked one of those paradigm-changing moments in the US economy," says John Challenger, a job-market expert at the outplacement firm Challenger, Gray, & Christmas in Chicago. Goaded by a crisis to downsize, firms "found that they could basically do the same amount of work ... so they have not rushed to add jobs back."

A technological revolution that began with personal computers a generation ago is both allowing increasingly sophisticated tasks to be automated, and allowing employers to guide their workers to do the right tasks at the right time, Mr. Challenger says. While that force continues to play out, "we're now in a period where we're waiting for the next [big sources of job creation]."

In a popular e-book published earlier this year, economist Tyler Cowen of George Mason University in Fairfax, Va., focused widespread attention on what he calls "the Great Stagnation." He argues that for about a century, America was able to reap rapid growth by harvesting "low hanging fruit" – cheap land, the shift toward universal schooling, and the application of technologies like electric power grids. But for more than three decades now, income growth for ordinary families has stagnated, relative to inflation. And the most recent economic expansions, starting in 1991, have been disappointingly slow, at least in their early years.

Rebooting the economy won't be easy. The political left and right have differing prescriptions. President Obama is expected to unveil his latest jobs plan in coming days. But Mr. Cowen, among others, frets that both parties are pushing unrealistic visions that put too much stress on either government spending (the Democrats) or tax cuts (the Republicans).

And the need to put people back to work may be more urgent now than after most recessions. It holds implications for family well-being, as usual, but also increasingly for the fiscal health of government and America's standing in the world.

Consider just one intertwined issue: The consensus among analysts is that tough choices lie ahead if America is to correct its myriad fiscal issues – including some sort of entitlement reform. But many of these difficult decisions are predicated on the job market getting back to normal. If jobs (and hence tax revenues) fall short, the arithmetic – and politics – will be all that much harder to make work.

Still, for all the daunting challenges, it's not a foregone conclusion that America will suffer a "lost decade." Just because things look bad now doesn't mean they will remain so, as the US and other nations have proved before.

Here are six reasons that help explain why job creation has been so frustratingly slow coming out of the Great Recession – and why those forces may not last forever.

1 The rent-a-worker economy


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