The U.S. economy is undergoing a transition that may rival the changes produced by the Industrial Revolution. The general directions are clear: an ever smaller share of the nation's work force is employed in the manufacturing sector; service sector industries are the source of most new jobs; and some "high tech" industries have had explosive growth. Unfortunately, at a time when the United States is said to be entering an era of human capital, the gap between work force supply and demand appears to be widening. There will not be enough new workers to fill projected new jobs, and, without effective action, a large percentage will not be qualified. Business and government are working separately and in concert to close the human capital gap. State and local governments are central to making the link between economic development and human development. Local economic development practitioners are developing partnerships with local Job Training Partnership Act agencies, secondary and postsecondary institutions, private training agencies, and the private sector. Four areas of high priority for the economic development strategies of many states and localities are manufacturing modernization, high technology development, new business creation, and service sector expansion. (YLB)