Small Businesses Not Hiring

Businesses starting smaller, creating fewer jobs: study

On Monday July 11, 2011

By Lucia Mutikani

WASHINGTON (Reuters) – New businesses are starting leaner and with fewer employees than was the case in the past, an independent study showed on Monday, suggesting that the pace of job creation will remain frustratingly slow.

The study by the Kauffman Foundation found that this trend was already entrenched well before the 2007-09 recession, which destroyed more than 8 million jobs.

Startups are key to long-term employment growth. The study drew on data on new establishments from the Bureau of Labor Statistics and the Census Bureau to paint a bleak picture of an economy struggling to generate enough jobs to absorb the 14.1 million unemployed Americans.

Job growth has stalled in recent months, with employers adding a scant 18,000 workers to their payrolls in June and the unemployment rate ticking up to 9.2 percent from 9.1 percent in May. Nonfarm employment increased a meager 25,000 in May.

“One of the major problems that we have is that businesses have been starting smaller and growing less for the last several years,” said E.J. Reedy, a Kauffman Research fellow and co-author of the study.

“That jobs deficit has accumulated and needs to be addressed,” he told Reuters, noting that new businesses were struggling to grow in the first five years.

Prior to the recession, roughly 45-50 percent of start-ups survived. But the survival rate has dropped below 45 percent.

The study found that new firms created in 2009 were on track to create one million fewer jobs in the next decade than historical averages. Historically, new firms in the United States generate about 3 million new jobs every year, but have since downshifted, creating only 2.3 million jobs in 2009.

JOBS DEFICIT

The study’s analysis of the Census Bureau’s data found that the number of new employer businesses had dropped 27 percent since 2006.

Although the level of startups has held steady or even edged up since the recession, when including new employer businesses and newly self-employed workers, it said they did not grow enough to generate the new jobs needed to support overall economic growth.

Its analysis of BLS data shows employment at new businesses dropped from a peak of 4.7 million jobs annually between 1997 to 2000 to less than 2.5 million in 2010.

At the firm level, the decline is more dramatic. New businesses opened their doors with about 7.5 jobs on average for much of the 1990s, the study found. But the number has dropped to 4.9 jobs.

Similar findings are deduced from the Census Bureau data. Aggregate employment at new establishments peaked in 2006 at just under 7 million jobs and dropped to fewer than 4.5 million by 2009.

An examination of the Census Bureau’s data on new independent firms showed a 700,000 decline in jobs created between 2008 and 2009.

“While the recession certainly deepened the jobs deficit, the U.S. economy stopped producing enough new jobs well before the downturn,” said Robert Litan, Kauffman Foundation vice president of research and policy and study co-author.

“Startups are the key to long-term employment growth, and they have been hiring fewer people for the last several years. We won’t fix our core unemployment problem in the United States until young businesses get back on track.”

The study recommended that policymakers focus on young and small businesses to address the nation’s unemployment problem, and it cautioned against hoping that the growing ranks of self-employed workers will solve the jobs shortfall.

“We need to find a way to start more employer businesses, ensure that they are larger and nurture their growth,” Litan said.

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Clean Tech Can Lead an American Jobs Resurgence

David Griffith’s Note: America‘s share of advanced battery production is soaring and could be as much as 40% of world output in 5 years – this is a bandwagon we need to get behind to propel job growth in this country and restart our economy.

Electric Cars a “Win-Win” for America, Former Gov. Granholm Says

By Stacy Curtin | Daily Ticker

The June jobs report was shockingly abysmal. Only 18,000 jobs were created last month and the unemployment rate ticked up from 9.1% in May to 9.2%. (See: June Jobs Report: the Ugly, the Ugly, and the Ugly)

Jennifer Granholm, former Governor of Michigan and now a senior adviser to the Pew Clean Energy Campaign, has a solution: Invest in clean energy solutions like the electric car, which in turn will create thousands of auto and advanced battery manufacturing jobs.

Today, electric cars like the Chevy Volt costs thousands of dollars more than a regular gas-powered vehicle, making them uneconomical for many Americans — even with a tax credit of up to $7,500. All that could change by 2017 according to Granholm, who cites a projection by Energy Secretary Steven Chu. But price parity and new jobs are all contingent on more investments and subsidies to help jump-start technological advancements in the lithium ion batteries — the batteries that go into electric cars.

“Remember the cost of computers? Remember the cost of cell phones before they were able to benefit from technological advances and commercialize [and] take those technologies to scale?,” she asks Aaron in the accompanying interview. “Already the battery costs have dropped 50% since they were introduced a few years ago…[and] Michigan is expected to create 63,000 [related] jobs by the year 2020.”

During his Twitter town hall on Wednesday, President Barack Obama echoed Granholm’s enthusiasm for clean energy investments and highlighted the great strides the country has already made in the battery sector.

“When I came into office, advanced batteries, which are used, for example, in electric cars, only accounted for 2 percent of the world market in advanced batteries. And we have quintupled our market share, or even gone further, just over the last two years,” he said. “And we’re projecting that we can get to 30 to 40 percent of that market. That’s creating jobs all across the Midwest, all across America.”

For Granholm, supporting the electric car industry is not only a win for American jobs, it is a win for the country’s national security and energy independence.

Why Businesses Are Leaving California

Top 10 list why firms leave California

Orange County Register

December 28th, 2010 by Jan Norman

Irvine consultant Joe Vranich has made a name for himself in the past couple of years documenting companies that are moving jobs out of California, expanding outside the Golden State because of its business regulations/ taxes or packing up and leaving completely.

So the California Chapter of Americans for Prosperity asked Vranich to come up with a David Letterman-type top 10 list of reasons businesses are leaving California:

Americans for Prosperity is a 1.5 million-member nonprofit that promotes limited government and free markets. Vranich cites several studies and surveys in his list:

10. Unfair taxes (Tax Foundation ranks California as 48th for tax fairness.)

9. Most expensive business locations (Rose Institute for State and Local Government has many California cities as the most expensive U.S. places in which to do business.)

8. Worst performing labor (Pacific Research Institute rates California’s labor performance over a five-year period) as lowest in the nation.)

7. Dreadful legal treatment (Civil Justice Association of California ranks California as 44th in legal fairness to business.)

6. Worst regulatory burden (Consultant Bain & Co., in a 2004 report for the California Business Roundtable,  said California is far worse than any other state on its “regulatory hassle index,” based on cost, uncertainty and complexity of government regulations.)

5. Harsh treatment motivates exits (Bain & Co. also said more than half of California’s business leaders said their companies had a policy to restrict job growth in this state.)

4. Unfriendliness (The Small Business and Entrepreneurship Council ranks California 48th — Vranich says 49th based on the council’s 2009 report — in business friendliness.)

3. High misery index (Associated Press publishes a monthly economic stress index that ranked California 3rd highest in December.)

2. Uncontrollable spending (Several pollsters say people are angrier about California government than at any other time in the polls’ history.)

1. Worst state to do business (Chief Executive magazine surveyed company executives to conclude that California is the worst place in which to do business.)

David Spady of the Americans for Prosperity says the California chapter has been posting a YouTube video each week as a way to educate people about issues. Another video in the series that Spady did entitled “Around the World on $69 million in Welfare Funds” has been viewed more than 276,700 times.

Vranich views California’s situation somewhat differently than do state Treasurer Bill Lockyer and Stephen Levy, director of the Center for Continuing Study of the California Economy. They defend the state in this Los Angeles Times opinion piece.

However, Vranich isn’t imagining the outbound moving vans. The Tax Foundation has an interactive database that shows Americans’ movement around the country. And more recently, the California Dept. of Finance documents moves by county.

I’ve given periodic updates of Vranich’s list of dearly departed companies. Here and here and here for example.

The Public Policy Institute of California says such anecdotes don’t add up to much impact. Its study of 1992 to 2006 (pre-recession) data concludes that “just 1.7% of California’s job losses” are tied to companies moving out of state.