Start-Ups are Weakening as Job Creators

Here’s a fact that should worry those people who are relying on entrepreneurs to solve this country’s unemployment problems.

Recently released Census Bureau data shows that start-ups account for a shrinking share of U.S. job creation. A report analyzing the Census Bureau’s business dynamics data shows that the start-up job creation rate declined precipitously during the Great Recession, making the 2009 level the lowest since 1980. That decline comes on top of a downward trend in the number of jobs created by new businesses over the past three decades. These two factors have combined to reduce new company job creation to about two percent of U.S. employment.

Percentage of U.S. Jobs That Come from Job Creation by Startups by Decade, 1980 to 2009:

Source: Haltiwanger, J., Jarmin, R., and Miranda, J. 2011. Business Dynamics Statistics Briefing: Historically Large Decline in Job Creation from Startup and Existing Firms in the 2008-2009 Recession, March

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Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

2 Reactions
  1. Entrepreneurs increasingly use technology (such as SaaS) to allow fewer employees to do more. While this may not be good for the number of jobs, it doesn’t mean that startups aren’t helping improve the overall economy.

  2. Is this a cause for worry? I believe that small businesses are surviving though, when major players fall in this uncertain times. Now, I’m reminded of this YouTube video I saw recently, where everyone’s invited to this Small Business Saturday campaign, on November 26, to help make a difference by purchasing a single item in their favorite local small business.