McKinsey outlines risk of sustained unemployment

A new report by the McKinsey Global Institute finds that only in the most rosy economic scenario will the U.S. reach "full employment”  by 2020.

The U.S. would need to create 21 million jobs by then for 5 percent unemployment to be reached. A more likely mid-range scenario sees 17 million jobs being created and 7 percent unemployment by 2020, McKinsey finds.

The report will be the subject of a noon discussion featuring outgoing White House Council of Economic Advisers Chairman Austan Goolsbee.

McKinsey raises the alarm that an even lower job growth scenario of only 9.3 million new jobs is possible.

A key finding in the McKinsey study is that working-class jobs have come under increased pressure from automation such as retail self-checkout, while among college graduates there is a large mismatch between fields of study and needed skills. Too many students are specializing in business or social science instead of technical subjects. 

To address the risk of low-growth recovery from the recession, McKinsey has four broad sets of recommendations: improve employee skills, harness globalization, spark innovation and deregulate. White House economic adviser Austan Goolsbee said the White House Council on Jobs and Competitiveness is working with McKinsey in developing its own recommendations. President Obama will meet Monday with the Council.

The first category includes recommendations like creating a national database so students have more access to information when choosing a college major. The second involves a push to attract foreign direct investment while stimulating exports by small business.

The third category includes encouraging venture capital formation and directing government purchases of new technologies.

On regulation, McKinsey states that “uncertainty over the direction of regulation … has made some companies hesitant to invest.” It suggests enterprise zones where business would be less subject to regulatory delays. It also focuses on the patent office’s three-year application delay. The House is moving toward floor action, possibly next week, on a PTO reform bill.