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Old 09-14-2012, 08:09 AM  
Direckshun Direckshun is offline
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Job startups, worse now than during the recession, even.

Really hard to read something like this, especially when you consider startups are the spirit of the American economy, if not its key driver. You need a healthy influx of startups for the invisible hand of the market to work at maximum efficiency.

But, despite all signs that it should be improving, it isn't. Matter of fact, the appetite for doing it these days seems to be gone.

http://blogs.reuters.com/felix-salmo...-the-startups/

Job creation: Where are the startups?
By Felix Salmon
September 13, 2012

Tim Kane, at the Hudson Institute, has a new paper out with a simple title: “The Collapse of Startups in Job Creation”. His paper is basically a slightly politicized version of the charts put out by the Bureau of Labor Statistics last month, under the headline “Entrepreneurship and the U.S. Economy”. The first two charts are particularly striking. The first one looks at the number of startups in America — companies less than one year old.



This shows a reasonably steady rise in entrepreneurship from 1994 to 2006, then a collapse as the housing bubble bursts, and — most worryingly of all — no recovery at all after the recession ends. Instead, we have significantly fewer startups right now than we did even at the depths of the recession.

If you look at the number of jobs at these startups, rather than the number of startups, the picture is equally bad, although the decline is older. This series peaked back in 2000, and has been declining ever since:



This doesn’t make a lot of intuitive sense. As Kane writes,

Quote:
Economic theory suggests that the modern economy offers a better environment for even more entrepreneurship. First, there is a wider technology frontier to explore. Second, a wealthier society enables more individuals to explore rather than merely work to survive. Third, the shift to services requires less startup capital than manufacturing or agriculture. In other words, the downward trend in the rate of entrepreneurship should, in theory, have rebounded by now.
Kane thinks that it’s something to do with taxes and regulations; I don’t buy it. But he also has a globalization argument:

Quote:
An American entrepreneur has zero tax or regulatory burden when hiring a consultant/contractor who resides abroad. But that same employer is subject to paperwork, taxation, and possible IRS harassment if employing U.S.-based contractors.
Are jobs at US startups effectively being offshored? I don’t know. But I do know that small business is where the jobs are, in this economy. Here’s the chart:



The green line, at the top, is the number of jobs at small businesses, with less than 50 employees. The red line, underneath it, is the number of jobs at medium-sized businesses, with somewhere between 50 and 500 employees. And the steadily-declining blue line, at the bottom, is the number of jobs at large businesses with more than 500 employees. Clearly, if we want to boost job creation, the best place to look is not the blue line but the green line. And equally clearly there has been an increase in the number of jobs at small firms overall, since the recession ended.

So if small firms in general are hiring again, what’s the problem with startups? Kane has run the numbers back to 1989, to come up with this chart:



There’s really nothing predictable about the dismal showing in the last three years of this chart — and especially not in the last two years, when we’ve had a recovery accompanied by record-low interest rates.

Admittedly, all of these numbers are low: at their peak, startups employed only a little more than 1% of the population, and now they employ a little less than 1% of the population. Concentrating on startups is not going to move the broader employment needle very much. But the dynamic here is surprising and troubling, all the same. Intuitively, if people can’t find work for an existing company, they should be more likely, not less likely, to go out and found a new company themselves, instead. But that doesn’t seem to be happening.

The only thing I can think of here is that for all that we think of startups as being largely high-tech things, in reality a huge number of them are in the construction industry, in one way or another. In a word, subcontractors. And no one’s starting new granite-countertop installation companies right now. But still, startups are a decent proxy for the dynamism of an economy. And these charts don’t bode at all well, on that front.
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Old 09-14-2012, 08:09 AM   #2
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Old 09-14-2012, 08:12 AM   #3
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I would have to think this information factored hard into Bernanke's decision.

Opne-ended quantitative easing seems to play directly to the advantage of a potential starter-upper.
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Old 09-14-2012, 08:37 AM   #4
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Originally Posted by Direckshun View Post
I would have to think this information factored hard into Bernanke's decision.

Opne-ended quantitative easing seems to play directly to the advantage of a potential starter-upper.
Why? We have had low interest for years and that is not why startups are slow. QE does not address uncertainty on taxes and cost. Nor does it impact consumer demand. Regulations continue to expand.
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Old 09-14-2012, 09:10 AM   #5
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With all the new QE, it's not going to be as easy as you might think to get loans to start businesses. Banks aren't as likely to take risks when rates are so low.

There is a lot of money sitting on the sidelines until the Obama malaise hopefully goes away.
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Old 09-14-2012, 10:22 AM   #6
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Originally Posted by Direckshun View Post
I would have to think this information factored hard into Bernanke's decision.

Opne-ended quantitative easing seems to play directly to the advantage of a potential starter-upper.
I don't think it factored into his decision at all.

If you want to get serious about helping start-ups, you might want to look at the burdens being placed on companies by over-regulation and the crippling of small banks by Dodd-Frank.
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Old 09-14-2012, 10:27 AM   #7
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Quote:
Originally Posted by Direckshun View Post
I would have to think this information factored hard into Bernanke's decision.

Opne-ended quantitative easing seems to play directly to the advantage of a potential starter-upper.
I think Bernanke's actions have more to do with keeping interest rates surpressed than anything else. Because once that wall is breached it starts to squeeze the economy from every direction.

As far as the lack of business activity it's not really surprising. Capital is strangled at the moment and why Obama supporters believe that constricting that capital further with tax policy is a good thing.

Fairness.
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Old 09-14-2012, 10:35 AM   #8
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I don't think it factored into his decision at all.

If you want to get serious about helping start-ups, you might want to look at the burdens being placed on companies by over-regulation and the crippling of small banks by Dodd-Frank.
I can attest to this. I own a piece of a bank and Dodd-Frank pretty much forced the sale of pieces of the bank's portfolio that, while profitable, became too difficult to retain. I have no doubt that a lot of these things were unintended consequences, but they are choking local banking in many respects.
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Old 09-14-2012, 10:35 AM   #9
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It's perplexing. I can't imagine why people would be timid about starting businesses in the pro-business climate that RObama Hood and his merry band of democrats have fostered.
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Old 09-14-2012, 10:39 AM   #10
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It's perplexing. I can't imagine why people would be timid about starting businesses in the pro-business climate that RObama Hood and his merry band of democrats have fostered.
Instead of dividing up wealth, perhaps we should have policies that create wealth.

- Raising taxes on those that invest capital will not generate more capital;
- Adding overhead expenses to operations will constrict sales, not improve them;
- Forcing activity through the inefficient levers of government does not make business more efficient.

Not my rules...
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Old 09-14-2012, 10:45 AM   #11
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Originally Posted by qabbaan View Post
With all the new QE, it's not going to be as easy as you might think to get loans to start businesses. Banks aren't as likely to take risks when rates are so low.

There is a lot of money sitting on the sidelines until the Obama malaise hopefully goes away.
Yes.
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Old 09-14-2012, 10:46 AM   #12
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It's perplexing. I can't imagine why people would be timid about starting businesses in the pro-business climate that RObama Hood and his merry band of democrats have fostered.
Spot-frigging-on.
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Old 09-14-2012, 11:21 AM   #13
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in this day in age, unless you have something special and all the stars align or you are an expert in something. It's pretty damn stupid to try and start your own business. America hates small business. Too many damn regulations and expenses.

Obviously people starting a business isn't in the best interest of corporations, corporate interest and control is what this country is about and the big corps pay good money to keep things this way for them.
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Old 09-14-2012, 11:25 AM   #14
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America hates small business.
That'll change.

Steve Jobs started an empire by talking his best friend into building $3it in his garage...
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Old 09-14-2012, 11:42 AM   #15
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Awesome. Another thing that Obama can run on.
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