Is job growth in the U.S. created entirely by startups? Is the economy that stagnant? According to U.S. Census Bureau data and analysis by the Kauffman Foundation, the answer to both questions is yes.
Here’s an excerpt from the Kauffman study report:
The study reveals that, both on average and for all but seven years between 1977 and 2005, existing firms are net job destroyers, losing 1 million jobs net combined per year. By contrast, in their first year, new firms add an average of 3 million jobs.
Further, the study shows, job growth patterns at both startups and existing firms are pro-cyclical, although existing firms have much more cyclical variance. Most notably, during recessionary years, job creation at startups remains stable, while net job losses at existing firms are highly sensitive to the business cycle.
Thanks to Matt Price of Capsearch for the link. What do you think, Arkansas entrepreneurs and innovators? Can you carry the economy on your back?
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I’ll be interested to read more comments on this.
If start-ups do all this hiring, they’re going to need access to capital. And how easy has it been lately for start-ups to get the money they need to build out their businesses?
If we’re going to depend on start-ups for job growth in this economy, we might have problems.
But of course I’ve read other opinions that these tough times are actually the best times for VCs and start-ups.