Best of the Week
Most Popular
1.North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - Nadeem_Walayat
2.Researchers Find $10 Billion Hidden Treasure In A Dead Volcano - OilPrice_Com
3.Gold and Silver : The Battle for Control - Rambus_Chartology
4.Asda Sales Collapse and Profits Crash! UK Retailer Sector Crisis 2017 - Nadeem_Walayat
5.Deep State Conspiracy or Chaos - James_Quinn
6.The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - Plunger
7.Gold Stocks Coiled Spring - Zeal_LLC
8.Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - John_Mauldin
9.Crude Oil Price Precious Metals Link in August - Nadia_Simmons
10.Gold and Silver Precious Metals Nearing Breakout - Jordan_Roy_Byrne
Last 7 days
Global Financial Crisis 10 Years On: Gold Rises 100% from $650 to $1,300 - 23rd Aug 17
GBP/USD Extends Losses - 23rd Aug 17
Donald Trump Terrorist in Chief, “We Aren’t Nation-Building Again, We Are Killing Terrorists” - 23rd Aug 17
How Planned Fed Rate Increases Impact The National Debt & Deficits - 23rd Aug 17
The 3 Assets to Add to Your Stocks Portfolio in This Rate Tightening Cycle - 23rd Aug 17
Half Price UK Theme Parks Entry 2017 With Cheap Chocolate Packs - 23rd Aug 17
[GIFT] Market Control System! - 23rd Aug 17
4 Reasons European Stocks Will Make a Big Comeback This Year - 22nd Aug 17
3 Lesser-Known Charts Revealing a Massive Stock Market Disconnect - 22nd Aug 17
U.S. Treasury Secretary: "I Assume Fort Knox Gold Is Still There" - 22nd Aug 17
Is the Stock Market Setting itself up for a Spectacular Crash? - 22nd Aug 17
Power Elites Launches Civil War Against Trump - 22nd Aug 17
The Stock Market No Longer Cares About Trump - 21st Aug 17
The Coming Boom Of Productivity Will Get Our Economy Back On Track - 21st Aug 17
Buffett Sees Stock Market Crash Coming? His Cash Speaks Louder Than Words - 21st Aug 17
This Could Be The Biggest Gold Discovery In History - 21st Aug 17
Stock Market Correction in Full Swing - 21st Aug 17
Seeking Confirmations – US Stock Market - 21st Aug 17
The changing demographic of online gamblers - 21st Aug 17
Gold is a coiled spring… the breakout is here, fundamentals are in place, technicals are compelling - 20th Aug 17
A Midsummer Night's Dream: Buy Gold and Silver - 20th Aug 17
Gold Mining Stocks 2017 Fundamentals - 20th Aug 17
EIA Weekly Report and Crude Oil - 19th Aug 17
4 Insights for Adjusting Your Portfolio in a Rate-hike Environment - 19th Aug 17
Gold Direction Indicator - 19th Aug 17
Historical Inevitability and Gold and Silver Ownership - 19th Aug 17
You Are Being Lied To About “Low” Gold Demand - 19th Aug 17
This is Why Cocoa's Crash Was a Perfect Setup - 19th Aug 17
Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High - 19th Aug 17
North Korea Is Far From Being Irrational… It Has A Plan - 18th Aug 17
US Civil War - FUNCTIONAL ILLITERATES TRYING TO ERASE HISTORY - 18th Aug 17
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Anemic Job Creation During The "Schumpeterian Economic Depression"

Economics / Recession 2008 - 2010 Sep 29, 2009 - 01:16 AM GMT

By: Mike_Shedlock

Economics

Best Financial Markets Analysis ArticleThe Wall Street Journal is discussing some interesting trends in business creation and small business hiring. Please consider Sharp Drop in Start-Ups Bodes Ill for Jobs, Growth Outlook.


New companies will be crucial to the strength of any economic recovery. Businesses in their first 90 days of life accounted for 14% of hiring in the U.S. between 1993 and 2008, according to the Bureau of Labor Statistics.

But this recession is taking a particularly heavy toll on business creation, as sources of small-business funding dry up and would-be entrepreneurs become more risk-averse. When entrepreneurs do launch businesses, they are hiring fewer employees on average. The trends threaten to damp growth in jobs and economic output for years.

Company formation typically dips slightly in recessions, says Brian Headd, a Small Business Administration economist. Earlier this decade, business starts -- including new businesses and units of existing businesses -- fell 9% between the third quarter of 2000 and the first quarter of 2003, the BLS says.

This time, the decline has been steeper. Business starts fell 14% from the third quarter of 2007 to the third quarter of 2008; the 187,000 businesses launched in that quarter were the fewest in a quarter since 1995. The number ticked up slightly in the fourth quarter, the latest data available. But those new establishments created only 794,000 jobs, the fewest since the government began tracking the data in 1993.

To be sure, as in past recessions, some laid-off workers are starting businesses to stay afloat, or testing long-held dreams. The Kauffman Foundation, a nonprofit research group that promotes entrepreneurship, says more Americans started businesses last year than in 2007. Kauffman cites research by University of California, Santa Cruz, economist Robert Fairlie, who analyzes different BLS data.

Mr. Fairlie, says statistics suggest more businesses are being created more out of "necessity" than "opportunity." That "does not bode as well for economic growth," he says.

The number of new businesses with relatively low income potential -- such as baby-sitting and house-cleaning services -- grew last year. But compared with 2007, there were fewer new businesses with high income potential -- like law firms, medical offices and manufacturing outfits.

Trends In Business Hiring



Chart courtesy of the WSJ with data from the BLS. I added the arrow in hot pink.

Birth/Death Numbers Revisited

Inquiring minds are asking "What Birth/Death numbers for 2007 and 2008 did the BLS report?"

Jobs Flashback January 4, 2008

Unemployment Soars as Private Sector Jobs Contract


Average Birth Death Adjustment for 2007 is 94,000 jobs per month due to presumed net business job creation.

Jobs Flashback January 9, 2009

Jobs Contract 12th Straight Month; Unemployment Rate Soars to 7.2%


Average Birth Death Adjustment for 2008 is 57,000 jobs per month due to presumed net business job creation.

That does reflect a dip, but remember that birth/death adjustments are net figures. The article did not provide a chart of businesses that went out of business in during the recession.

In the third quarter of 2008 the the 187,000 businesses launched were the fewest in a quarter since 1995 and the number of jobs per startup had collapsed, yet the BLS still had positive net numbers for the year.

Presumably the net number of business startup jobs rose during the entire recession even though the number of startups and the number of jobs created per startup were both declining,

I do not buy it. Can we see the data on business deaths please?

Jobs Flashback September 4, 2009
Jobs Contract 20th Straight Month; Unemployment Rate Hits 9.7%


Anyone believe that preposterous set of numbers?

So far in 2009, The Birth Death adjustment is adding 84,000 jobs per month due to presumed net business job creation.

Thoughts on the Schumpeterian Depression

My friend "BC" writes:

During Schumpeterian Depressions, large, cash-rich firms dominate and push increasing scale and standardization, whereas small firms suffer from a lack of capital and a reluctance by banks to lend.

This trend should persist well into the next decade, as deflationary depressions and the associated demographic cycle reduces business start-up activities, and this time around Venture Capital activity.

Also, younger workers of a peak demographic cohort lack the capital and longevity in the occupational structure to have made sufficient contacts and gotten access to capital and equipment in order to reach the necessary critical mass of experience, reputation, and problem solving one demonstrates sometime in their mid- to late 20s to early to mid-30s.

Thus, we are not likely to see a new wave of incremental innovation and new capital formation and business start ups until no earlier than the mid-to-late '10s to early '20s. In the meantime, mass cross-industry consolidation, R&D moving inside large firms, spin-offs, firings, wealth consumption, and shifting composition of household spending led by Boomers in late life will combine to slow growth for years to come.

Moreover it is questionable as to whether China and India can buck the larger demographic and Schumpeterian-curve trends, as they have come to rely so heavily upon US supranational firms' Foreign Direct Investment in plants, equipment, trade credits, and intellectual property. The growth of US and Japanese firms' FDI will likely continue to decelerate with "trade" for years to come.

For more on Schumpeterian Depressions, please see Creative Destruction.

By Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife