Aftermath of the Recession

January 4, 2010 by Emsi Burning Glass

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Robert J. Samuelson, an op-ed columnist for the Washington Post, outlines some noteworthy economic trends and things to keep in mind as we embark on a new decade. Recent migration numbers, showing the decline in movement between states, are just one “scar” left from recession, Samuelson argues.

Moving forward, trade and entrepreneurship will be key indicators to watch, he writes. And when we think of entrepreneurship, it is most important to look at young firms.

Most economists see stronger exports as a substitute for weaker consumer spending. Unfortunately, that depends heavily on economic growth and trade policies abroad. By contrast, entrepreneurship is a sleeper issue that depends on what Americans do.

If you doubt its importance, consider this: All net job creation from 1980 to 2005 came from firms that were five years old or less, according to a study by economists John Haltiwanger of the University of Maryland and Ron Jarmin and Javier Miranda of the Census Bureau. In any one year, that may not be true; but over time, mature firms lose more jobs than they create. “It’s not small firms but young firms that count,” says economist Robert Litan of the Kauffman Foundation, which sponsored the study.

If Americans don’t continue to create firms — not just high-tech start-ups such as Facebook but construction companies, florists, restaurants, dry cleaners, engineering firms — the economy may languish. Beginning a business is a risky, exhausting, chaotic process. Every year, there are roughly 500,000 to 600,000 company “births” and almost as many “deaths.” Half of new firms don’t make it to year five, says Litan.

Tim Kane of the Kauffman Foundation weighs in on Samuelson’s column here.