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 mostrecent BDS update, which now has data through2009—the trough of the recent recession.The BDS shows a very large decline in gross jobcreation from existing firms as well as startups in therecession. Economy-wide job-creation rates and thejob-creation rate from business startups (new firms)are lower in 2009 than in any year since at least1980. The historically low rates in 2009 reflect manyfactors, the first of which is the very large decline inoverall economic activity.However, the recession exhibited not only a verylarge decline in overall activity, but also an especiallylarge reduction in overall job creation, and in jobcreation from startups and new establishments.The historically low job creation rates from businessstartups combined with a secular downward trend injob creation and destruction rates over the past fewdecades contribute to 2009’s lower job creation rates.
One item that struck me was the decline in job destruction along with the decline in job creation. From 1980 to 1989 on average 16.2% of total jobs were lost. In the next two decades the average slipped to 14.8%. I have no ready answer as to why this happened and the authors confine themselves to a review of the data so we’re left with guesses. Assuming that there definition of all jobs includes both private and public sector employment we might surmise that the growth in government workers and the attendant stability of those positions might account for a large part of the decline. Of course, the steady decline in job creation by startups would also partially explain why job destruction declined. Startups fail more frequently than established companies, hence a decline in job creation by them will also impact the job destruction statistics.
But putting that aside, the study seems to confirm that the “jobless recovery” we moaned about after the 2000-2001 recession as well as the disastrous labor market we are currently experiencing are merely reflections of a trend which has been developing for decades. It took a major economic catastrophe to highlight the fact that the labor market has been becoming sclerotic for some time.
High unemployment looks as if it will be with us for some rather long d of time if the folks from Kauffman are right.
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