Friday, April 1, 2011

A Decline in Startups and Jobs

Here is an interesting post that has been getting some traffic today based on a paper that was written by the Federal Reserve Bank of Cleveland. The paper discusses a real decline in start-ups which began right before the economic troubles started, making an argument that the high US unemployment rate is related to this lack of new ventures. The post from the NY Times is called A Decline in American Entrepreneurship by Catherine Rampell. From the post: American workers weren’t the only ones sacrificed by the Great Recession. Start-ups suffered, too. A new paper from the Federal Reserve Bank of Cleveland tracks various measures of entrepreneurship over the last few years. It found that the number of businesses with employees — one indicator of entrepreneurial activity, like self-employment — took a nosedive. The population-adjusted number of businesses began falling even before the recession officially began in December 2007. But once the downturn hit, the number of businesses began falling precipitously. Some of that decline was because of business failures. But it was primarily tied to the lack of new business formation. The report’s author, Scott Shane, writes: 68,490 more businesses closed in 2009 than in 2007, an 11.6 percent increase in the business closure rate. But in 2009, 115,795 fewer employer businesses were founded than in 2007, a 17.3 percent decline in firm formation. The financial crisis held back new business formation in many other countries, too, as documented by this paper presented last fall at the Federal Reserve Bank of Atlanta. Given these findings, it is perhaps no wonder that the job market is still so poor. Young businesses (not small businesses, despite what politicians may tell you) are the biggest engines of job growth. With so few businesses forming, hiring is staying very depressed. And the main problem in the job market is not layoffs — which are at a record low — but new hiring.


  1. Startups are having a hard time in todays economy because lack of funding from VC firms. The amount of VC funds have declined seriously over the last 5-8 years. Though the funds that exist still have substantial $$$, they are more risk adverse and are looking for only the best deals to fund. So for a startup to get financed they have to work 3x as hard as they had to. Here are some things entrepreneurs can do to have a better chance at getting Venture Capital .

  2. its really hard getting these days the right job. i just read something about it in UniformPoint and im not happy anymore after graduating college.(Skills Needed To Get Unfilled 3.4 Million Job Openings )... just so sad!