The Wall Street Journal had a small chart showing the age of US firms. Starting at the beginning of the current recession, the summer of 2008, the number of firms that were five years old or less dropped from 40% to 35%. That was shocking news to me.
The reason is that young firms (meaning firms five years old or younger) are a major source of new jobs and economic growth. The absence of these startups and young firms provides a good explanation of why the Obama recession has been the longest and most serious in a century.
Small firms (meaning those under 500 employees) comprise half of the employment in the United States and 60% of the new jobs. There are only 1 million firms with over 500 employees but there are 5.5 million under 500 employees. Half of these under 500 actually employ less than five employees. Overall, nearly 3/4ths of the companies with less than 500 employees have 10 or less employees. You can see that this small business component which generates the bulk of jobs and economic growth is made up of very small units. The kind I have worked with for 40 years.
I personally cannot understand why anyone would start a new business with all the inherent risks to their lives, risks to their future, risks to their investment and the investment of others in a milieu where the president of the United States is strongly anti-business. (Isn't he the one who said several times: ‘you didn't build that business the government did’?) At the same time he was spending a trillion dollars on government jobs. He and his Democrat-Union Congress did this at a time when every government union worker was making more money than the workers in ordinary jobs, getting better healthcare and astronomic retirement benefits.
Becoming a government worker is a desirable alternative to starting or joining a new business. A government worker never has to take any risk, never never anticipates being fired and knows she may get a fat butt along with lots of money when she retires early.
The data suggest to me that a large decline in stocks, which took a great deal of capital out of the hands of people who could have lent some to their friends to start a business combined with the government expanding its reach aggressively and led by a person who is anti-commerce was sufficient to make sure there would be no growth in the economy and pathetic growth in employment.