The Bulgarian labor market has seen remarkable improvements in recent years and has contributed to strong economic growth. The benign environment for job creation is now changing, as the global economic crisis impacts on labor market demand in Bulgaria. Compared to the EU27 averages, activity and employment rates have remained low, and Bulgaria has significant untapped domestic labor reserves. Bulgarian pupils in school also do not acquire the necessary skills and competencies to compete in a high innovation economy. Continued available vacancies suggest that skills shortages remain a barrier to employment even during the crisis and measures to retrain and up-skill the unemployed and those at risk of lay-off is an important policy direction for the short-term. In light of Bulgaria s demographic decline over the coming decades, medium-term growth and convergence require sustained increases in labor productivity and investments in human capital. Short-term measures during the economic crisis ideally combine efforts to keep workers in employment through temporary publicly subsidized short-working hour schemes as well as the use of unemployment benefits and measures to accelerate transitions from old to new jobs. The economic crisis is an opportune moment to address skills shortages both to tackle unemployment and to help the recovery in the short-term and to promote the foundation for medium-term economic growth and convergence. Looking at the medium term, with Bulgaria s labor productivity remaining low in a European comparison, sustained interventions from early childhood to adult education are necessary over the coming years to raise human capital and ensure the increases in labor productivity that Bulgaria needs to accelerate growth and convergence. In satisfying the growing demand for skilled labor and boosting employment, Bulgaria needs to urgently look at promoting the transition of young people from education to the labor market, including through keeping them longer in school and ensuring they earn the skills that are in demand in the labor market as well as promoting part-time employment and internship programs for young people.