This report identifies and quantifiesNepal's key jobs challenges and the implications forfuture job creation, job quality and gender disparities. Thediagnostic examines the slow pace of structuraltransformation, the existing distribution of jobs by workstatus, productivity level and worker characteristics, andthe role of migration in absorbing excess labor supply. Theanalysis of private sector labor demand finds that mostfirms are micro-sized, and the pace of wage job creation –although increasing – is insufficient to absorb job seekers,especially women. A new SME survey conducted for this studyconcludes that small firms struggle to compete and accesscredit, and they lack the capacity to obtain the skills andother inputs necessary to increase their product quality,ultimately limiting their growth capacity. Nepal'sbusiness environment and labor regulations create furtherimpediments to dynamic, job-creating economic growth. A setof policy recommendations is offered to mitigate labordemand and supply challenges to achieve better laboroutcomes in Nepal.