The latest data on employment in the United States confirm that theAmerican economy continues to recover from the Great Recession of 2008-2009,despite the slowdown engulfing the other G-20 nations. Indeed, the pace ofprivate-sector job growth has actually been much stronger during this recoverythan during the recovery from the 2001 recession, and is comparable to therecovery from the 1990-1991 recession.

During the last 31 months, private-sector employment has increased by 5.2million and theunemployment rate has now fallen below 8% for the first time in nearly fouryears. But the unemployment rate is still more than two percentage points abovethe long-run value that most economists view as normal when the economy isoperating near its potential.

Moreover, the number of long-term unemployed (27 weeks or longer) is about40% of the total – the lowest share since 2009, but still far higher than inthe previous recessions since the Great Depression, and about double what itwould be in a normal labor market. So the US labor market, while healing, isstill far from where it should be.

That is partly because the job losses during the Great Recession were solarge – twice as large as those of previous recessions since the GreatDepression. In terms of US economic history, what is abnormal is not the paceof private-sector job growth since the 2008-2009 recession ended, but ratherthe length and depth of the recession itself.

The downturn was a distinctive balance-sheet recession that causedsizeable declines in household wealth and necessitatedpainful deleveraging. Consistent with recoveries from such recessions, demandhas grown slowly, despite unprecedented fiscal and monetary stimulus, and thatexplains why the unemployment rate remains high. Indeed, businesses citeuncertainty about the strength of demand, not uncertainty about regulation ortaxation, as the main factor holding back job creation.

Public-sector demand has also contracted, owing to state and localgovernments’ deteriorating budgets. As a result, public employment, whichusually rises during recoveries, has been a major contributor to highunemployment during the last three years. Despite a modest uptick in the last three months, governmentemployment is 569,000 below its June 2009 level – a 30-year low as a share ofthe adult civilian population. According to HamiltonProject calculations, if this share were at its 1980-2012 average of about9.6% (it was actually higher between 2001 and 2007), there would be about 1.4million more public-sector jobs and the unemployment rate would be around 6.9%.

Recent reports suggest that there are more than three million unfilled jobopenings, and about 49% of employers say that they have difficulty fillingpositions, especially in information technology, engineering, and skilledtrades. This has fanned speculation that a “mismatch” between workers’ skills and employers’needs is a significant factor behind the elevated unemployment rate.

But there is scant evidence to supportthis view. The relationship between the unemployment rate and the job vacancyrate is consistent with patterns in previous recoveries. Nor is there anythingunusual about the size of mismatches between job openings and workeravailability by industry.

Such industrial mismatches become larger during recessions, reflectinggreater churn in the labor market as workersmove between shrinking and expanding sectors; but they decline as the economyrecovers. This pattern also characterizes the current recovery, and recent datasuggest that mismatches between the demand and supply of labor by industry areback to pre-recession levels.

But, as the USeconomy recovers, technological change is accelerating, fueling demand for moreskills at a time when the workforce’s educational-attainment levels have plateaued. This is the real skills gap thatexisted before the Great Recession, and it is getting worse over time.

The gap manifests itself in much higherunemployment rates for high-school educated workers than for college-educatedworkers at every stage of the business cycle. The gap also shows up insignificant – and rising – inequality between the earnings of high-schooleducated workers and those with a college degree or higher.

Earnings gains have been especially strong for those with tertiarydegrees, while the real wages of high-school educated workers, especially men,have fallen sharply. It is becoming increasingly difficult for workers with lowlevels of educational attainment to find high-paying jobs in any sector, evenwhen the economy is operating near full capacity.

The USwas the world leader in high school and college graduation rates for much ofthe twentieth century. Today it ranks in the middle of the OECD countries.

A major factor behind that relative decline has been the US school system’s failure toensure high-quality education for disadvantaged Americans, particularlychildren from poor, minority, and immigrant households. According to the mostrecent census, about one-quarter of childrenunder the age of six live in poverty. They are less likely to have access toearly-childhood programs that prepare them for school, and are more likely toattend schools that have high student/teacher ratios and that cannot attractand retain skilled teachers.

As a result of these and other problems, the average Americansecondary-school student receives inadequate preparation in core subjects suchas writing, mathematics, and analytical reasoning, which in turn reducescollege enrollment and completion rates. The US experience is consistent withOECD evidence that students from countries with greater income inequality scorelower on academic achievement tests. And arecent study by McKinsey suggests that the gaps in educational opportunityand attainment by income impose the equivalent of a permanent recession of 3-5%of GDP on the USeconomy.

To address the skills gap, the US must boost the educationalattainment of current and future workers. That means investingmore in education at all levels – in early-childhood education programs,elementary and secondary schools, community colleges, trade-school programs forspecific jobs in specific sectors, and financial aid for higher education.Above all, it means addressing the income disparities in educationalopportunity and attainment.