Is The American Jobs Machine Still Working

Here’s a few bits of information that might temper any optimism you have about an improving labor market in this country.

First, consider this from the WSJ economics blog:

The Census Bureau on Wednesday said that 403,765 new firms were started in the 12 months ended March 2009, down 17.3% from a year earlier and the fewest on records that begin in 1977.

New businesses are an important source of new jobs — without them, there would be no job growth at all. Indeed, the new Census data show that one of the reasons that the job market declines were so severe in the recession was the dearth of start-ups. Firms less than a year old employed 2.3 million people in March 2009 whereas as a year earlier start-ups employed 3 million people.

Want a little more meat to put on that bone? Here’s a study from the Kauffman Foundation that finds striking declines in job creation.

The Census Bureau’s Business Dynamics Statistics

(BDS) provides data on business dynamics for U.S.

firms and establishments with paid employees.

This briefing highlights some key features of the most

recent BDS update, which now has data through

2009—the trough of the recent recession.

The BDS shows a very large decline in gross job

creation from existing firms as well as startups in the

recession. Economy-wide job-creation rates and the

job-creation rate from business startups (new firms)

are lower in 2009 than in any year since at least

1980. The historically low rates in 2009 reflect many

factors, the first of which is the very large decline in

overall economic activity.

However, the recession exhibited not only a very

large decline in overall activity, but also an especially

large reduction in overall job creation, and in job

creation from startups and new establishments.

The historically low job creation rates from business

startups combined with a secular downward trend in

job creation and destruction rates over the past few

decades contribute to 2009’s lower job creation rates.