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Great Recession Slowed Job Creation to 29-Year Low
Ewing Marion Kauffman Foundation

April, 2011

In 2009, at the height of the Great Recession, the economy saw historically large declines in job creation rates from startup and existing firms—the lowest rates in nearly 30 years—while job losses also increased. From 2006 to 2009, the overall job creation rate fell 4 points (from 16.5 percent), and among startups the job creation rate fell by 1 point (from 3 percent). However, compared to 2006 rates this represents a 25 percent decrease in overall job creation and a 34 percent decline among startups. Despite this grim reality, new and expanding firms still created more than 14 million new jobs.

These facts and more were released today in a brief on the latest update to the Census Bureau’s Business Dynamics Statistics (BDS), which is partially funded by the Ewing Marion Kauffman Foundation to provide annual business data on U.S. firms and establishments with paid employees from 1976 to 2009.

"While we know all too well that jobs were lost, this is the first indication of how the recession impacted job creation. It's heartening to know that, despite the economic obstacles, entrepreneurs were still finding ways to create jobs, though fewer than in past recessions," said Robert E. Litan, vice president of research and policy at the Kauffman Foundation. "We hope these data prompt policymakers to clear away any rules and regulations that stand in the way of entrepreneurs and innovators who want to grow companies and jobs."

This BDS brief shows job creation rates for existing businesses and new firms are lower in 2009 than in any year since at least 1980. These historically low rates reflect more than the large decline in overall economic activity and job creation at the time. The downward trends in both job creation and destruction rates over the past few decades, accompanied by the secular decline in the job-creation rate from business startups, also contributed to 2009’s lower job-creation rates.

In evaluating job creation rates of startups and existing firms in recessions over the past three decades, the brief found that startups were more impacted by the Great Recession than any other recession since the early 80s. Between 1999 and 2002, startup job creation remained steady, while job destruction increased. In the most recent recession, job destruction also increased but job creation decreased substantially.

This report is the fifth BDS Brief. The BDS includes measures of business startups, establishment openings and closings, and establishment expansions and contractions in both the number of establishments and the number of jobs. The BDS data provide these new statistics on an annual basis for 1976-2009, with classifications for the total U.S. private sector by broad industrial sector, firm size, firm age and state. The BDS is the result of a collaboration between the U.S. Census Bureau’s Center for Economic Studies and the Ewing Marion Kauffman Foundation with additional support from the U.S. Small Business Administration. Further information about the BDS can be found at www.ces.census.gov.



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