Monday, November 21, 2011

Atlanta Fed: "Job creation by small firms: Age matters"

I was really struck by the Kaufman Foundation report, referenced in the second post below, when it came out last year.
The report pointed not that it's not accurate to say that small businesses are the job creators, it's small young businesses that have the greatest need for workers.

Two from the Atlanta Federal Reserve Bank's Macroblog, first up the headline story:
Talking about the role of the average or typical small business in job creation is problematic. Discussing it is challenging because job creation is highly skewed along the age dimension of small firms. This point was driven home in a nice presentation (featuring the chart below) by John Haltiwanger at last week's small business conference cosponsored by the Atlanta Fed, the Board of Governors, and the Kauffman Foundation.

The chart shows the 90th and 10th percentiles of the employment-weighted job growth rate distribution by firm age. The fastest-growing firms are the 90th percentile (in purple) of the growth distribution, and the fastest-shrinking firms are the 10th percentile (in green). The data are from the Census Bureau's "Business Dynamics Statistics" (for example, here is a related presentation by John Haltiwanger, Ron Jarmin, and Javier Miranda).

As the chart makes clear, the fastest-expanding 10 percent of young firms grow extremely rapidly. While the fastest-growing 10 percent of older firms also expand at a good clip, their growth is much slower than that of their younger-firm counterparts....MORE
See also:

Bank lending to finance a business start-up
...Echoing the findings of research conducted by the Kauffman Foundation and others (for example, here and here), President Lockhart highlighted the vitally important role that business start-ups have played as job creators in the U.S. economy. He also made a distinction between true small business start-ups—those that intend to be small-scale operations (usually with single location and no more than a handful of employees), and growth-oriented start-ups. Both types of start-ups play a role in job creation, but the biggest impact over time comes from successful high-growth start-ups.... MORE