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[This brief report argues that] the US unemployment rate is not likely to return to its pre-recession level over the foreseeable future. A heightened unemployment rate over the next two years will keep the pressure on policymakers to support the recovery. At the same time, increased impediments to job searchers matching with employers imply that the structural unemployment rate is likely higher than it was before the recession by probably one to two percentage points. While a slow improvement in aggregate demand relative to supply is likely to [steady] inflation over the next two years, a higher structural unemployment rate means that as unemployment begins to trend down, inflationary pressures will arise faster than they would otherwise. Wage pressures for high-skilled jobs in particular are likely to build more rapidly than those in other sectors of the economy. Underneath this macro picture is a story of increasing disparity between those that have the skills necessary to thrive in the post-recession US economy and those that do not. In addition to supporting the near-term economic recovery, policymakers will have to turn their attention to education and re-training in order to ensure that individuals are not left behind as the economy moves forward.

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