The economy has a job creation problem

From James Sherk, senior policy analyst in labor economics at the Heritage Foundation:
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The Bureau of Labor Statistics (BLS) announced ... that job losses in the first quarter of 2011 hit a record low. In the first quarter, employers eliminated the fewest jobs since the BLS began keeping track two decades ago. Job losses are now one-sixth below their pre-recession levels. Workers with jobs are less likely to lose them now than before the recession began.

This sounds absurd. At the start of the recession, the news was filled with stories of companies going bankrupt. The unemployment rate stands at 9 percent. Record-low job losses seem impossible.

They are not. Unemployment remains high because of another record announced today: Hiring at new businesses also hit a new low. Only 660,000 workers were hired at new business establishments — 27 percent fewer than when the recession began. Overall job creation, both at existing firms and at startups, has similarly fallen one-sixth since the recession began.

The economy has a job-creation problem. 

Entrepreneurs and investors are starting or expanding fewer businesses. Consequently, they need fewer new workers, making it very difficult for the unemployed to find work. If job creation had returned to normal at the recession’s end, unemployment would have returned to normal levels by now.

America needs more risk-taking and entrepreneurship. We need a climate that favors investment and business growth. Unfortunately, with Congress talking tax increases and the administration increasing regulation, this does not seem terribly likely.

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Link: http://www.nationalreview.com/corner/283461/job-losses-and-business-startups-hit-record-lows-james-sherk

Also see: http://www.heritage.org/research/reports/2010/03/the-cause-of-high-unemployment-still-due-to-dwindling-job-creation