It's a question long hovering over the US economy - why does job growth continue to lag while consumption grows? John Silvia, chief economist with Wells Fargo and member of the Walker College Business Advisory Council, offers an answer today in his "Character of Recover" on Production and Jobs: Marching to a Different Drummer. [PDF]

Silvia says the manufacturing sector continues to make progress, specifically in investments in equipment and other capital goods. Yet as that demand for product rises, the supply of labor to meet that demand remains static. Specifically, high-skilled labor, as the U.S. has an "oversupply of low- and semi-skilled workers and a shortage of high-tech scientists and engineers."

In the past, Silvia writes, "increases in U.S. production were met with increased demand for workers of all types." Today that demand for workers is not being found domestically, but overseas. 

In the 21st century, we deal with the realities of a global trade and production model. In this case, increases in U.S. domestic demand are not met by an equal increase in domestic supply; instead, demand is satisfied by increased imports. Therefore, domestic job growth lags. Yet, on the supply side, many workers are unable to respond quickly to changes in the demand for specialized skills as the development of human capital often takes more time than the market desires.

Therefore, many of the unemployed are unemployed longer because of a mismatch of skills—not just due to weakness in final demand. This problem has persisted in this cycle far longer than usual.

He offers no guess as to when employment may grow, nor possible solutions.

 John Silvia sees a good jobs future for NC, especially for younger workers. The chief economist with Wells Fargo, and member of the Walker College Business Advisory Council, spoke at the 2011 Economic Forecast, organized by the Greater Raleigh Chamber of Commerce. According to a report by WTVD, economic growth within the state will center in the Raleigh area.

Dr. John Silvia, Regional Managing Director for Wells Fargo, told members of the Raleigh Chamber of Commerce that the Triangle’s mix of education, healthcare and information technology sectors will create new jobs while other areas of the state will continue to face high unemployment. …

Silvia expects the state will add about 50,000 new jobs in 2011. But the economist says those jobs will not replace jobs lost in the Great Recession.

Dr. Silvia likened the state’s economy to a Tom Hanks movie. He says that we “survived the crash but we’re now living on a new island and we need to get used to it.”

A report by WRAL.com included comments Silvia made which should hearten recent and upcoming Walker College graduates.

Yet, they said, the number of jobs being created won’t replace many of the positions lost during the recession.

 ---- UPDATE ----

Two more news reports this week expanded on Silvia's remarks. He also discussed higher education spending in North Carolina, and suggested the state should close two institutions. He also said it may be time for universities, as well as students, to begin weighing the costs of pursuing specific degrees with expected benefits.

At the Greater Raleigh Chamber of Commerce's economic forecast summit last week, Wells Fargo economist John Silvia noted, "You can't study French literature for four years and make $100,000 a year." He pushed it further, theorizing that in this job-starved economy the traditional four-year learning odyssey might be "a waste of money" for some.

It was interesting to watch the faces in the audience – mostly local business people – as they weighed the investment against the benefits.

This has recently become known as the "higher education bubble." Last summer a Walker College economics professor indirectly addressed it when responding to a letter in the Charlotte Observer.