New research shows that the country’s rate of new business creation, which peaked about decade ago, plunged more than 30 percent during the economic collapse and has been slow to bounce back following the recession. And that’s despite the fact that, over the last few years, the portion of the U.S. population between the ages of 25 and 55 – historically the prime years for starting a business – has been expanding, according to data compiled by the Kauffman Foundation, an entrepreneurship research organization that hosted the event – the group’s annual State of Entrepreneurship symposium – on Wednesday.
Not surprisingly, fewer new businesses means fewer new jobs. Zandi cited Labor Department statistics showing that companies less than one year old contributed 5.2 million jobs in the year ending June 2014, down from the usual 6 million or so they generated in the years leading up to the recession and well off the normal pace of 7 million to 7.5 million jobs a year seen in the 1990’s.
“We’re getting less bang from our fast-growing companies,” said Wendy Guillies, Kauffman’s acting president. Echoing Zandi, she added: “I know the headlines look good, but when you dig a little deeper, something’s not quite right.”
It gets worse. While the rate of business formation has slowed, the pace of business closures, which had held steady over the previous decade, started to ascend in 2005 and spiked in 2008, according to data compiled by the Brookings Institute. Consequently, business deaths now outpace business births for the first time since researchers started collecting the data in the late 1970’s.
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