June 5, 2017

Big drop off in new businesses

Fast Company - In 2014, the economy hatched 154,000 fewer new companies than in 2006, despite the economy being almost 10% larger. If you assume, based on history, that each new business creates six new positions in its first year, that means 3.4 million fewer jobs in the 2006-2014 period than we might have expected.

“In the popular consciousness, startups have never been more celebrated or focused on,” says John Lettieri, co-founder of the Economic Innovation Group, a centrist think tank supported by several Silicon Valley Illuminati, in an interview. “We’ve never had a more entrepreneur-friendly popular culture. Tech companies have brought startups to the forefront. It’s just that overall, across the American economy as a whole, there’s a lot less dynamism than we’ve seen.”

Between 2010 and 2014, New York, Miami, Los Angeles, Houston, and Dallas produced the same net increase in firms (births minus deaths) than the rest of the country put together.  With the depressing title of Dynamism in Retreat, EIG’s report shows that fewer people are moving across state lines for work, that new companies account for a lower percentage of job hires than traditionally, and that job turnover rates are declining (from a high of 12.4% annually in 1999 to a low of 7.2% in 2015). These are all indications of decreasing “churn”–the process that has driven the economy in the past. Since the recession, firm closures have outpaced firm births, on average. In 2014, more than 200 metro areas had higher death than birth rates for companies.


Anonymous said...

Until the minimum wage goes up to a living wage of at least $15 an hour, this year, many more new businesses will fail or never get started. People can start all the businesses they want, but if there aren't enough people with disposable income to be customers, few new businesses will survive.

Anonymous said...

good comment, 1:46. I'd feel a bit of hope if our schools started intensively teaching elementary grades that money does not trickle down it percolates up - and that you don't get the most work done by giving all the incentive to a fraction few people at the top - and that you refresh an economy by putting money in the hands of the working families with unmet needs who spend it into the economy - and that you sustain an economy by creating mechanisms that stay on the job 24/7 correcting for the inherent flaw in capitalism: market forces do not distribute money in proportion to work, they do the opposite, concentrating money unjustly into heaps in the bank accounts of non-earners thereby making democracy by definition impossible.

Anonymous said...

I think a major part of the problem is the mountain of inescapable student debt. When I graduated from UW-Madison debt-free in the early 70s I was able to help found a non-profit theatrical and festival production company in Seattle which is still thriving today. No way I could have done that saddled with $50-$150K in student loans. The problem probably isn't limited to thwarting would be entrepreneurs but also would be small startup employees.