The New Stagflation: less jobs from less Startups, but more Government

Things ain't what they seem to be, or used to be.

New business formation has slowed in the last decade.  At the same time, the size of government has exploded.  Americans are poorly served by that combination.

New successful businesses create new jobs.  Yet our economy suffers from stagnation of job growth.  As Robert Samuelson, quoted below, writes: "there's a double whammy: fewer startups and slower growth at the survivors." 

So, what do we have that might best describe this?

Let's use a word from the Nixon-Carter 1970s and apply it to the current George W. Obama decade and a half:

Stagflation. Today it means: stagnation of job growth; inflation of government growth.

Speaking of the 1970s, that's when Miller Lite beer was introduced through an advertising campaign: Tastes Great, Less Filling.  Not so much anymore.

Today's Stagflation certainly doesn't taste great, but clearly it is less filling when it comes to creating jobs.  PB
------

From economist Robert Samuelson writing at Investors.com:


There's more discouraging news about American business — specifically about entrepreneurship.

We confidently assume that we have the world's most entrepreneurial nation, and the proof seems overwhelming.

Google, Facebook and Twitter are but three (relatively) recent startups that have become corporate titans.

Before them, there were others: Microsoft, Intel and FedEx. We seem to excel at nurturing new firms.

Or do we?

Previous studies have shown that, despite the success of firms like Facebook, the number of startups has dropped sharply, from about 13% of all firms in the late 1980s to about 8% in 2011.

Now a new study from the National Bureau of Economic Research reports that the expansion of the remaining startups — which traditionally has been much faster than the growth of existing companies — has slowed considerably.

By some measures, it now barely exceeds the average of older companies.

So there's a double whammy: fewer startups and slower growth at the survivors.

This could be one reason the recovery from the Great Recession has been so sluggish, with the economy's growth averaging about 2% annually from 2010 to 2014, much slower than earlier post-World War II recoveries...

The upshot: "Startups and high-growth young firms (under five years) contributed less to U.S. job creation in the post-2000 period than in earlier periods," said the report.

The startup slump may also help explain the slowdown in productivity — a measure of efficiency that ultimately raises living standards.

From 2010 to 2014, productivity grew a meager 0.3% annually, also well below the post-World War II average of about 2%, according to the Bureau of Labor Statistics...

Just what has caused the startup slump isn't clear, the study admits...

What's clear is the startup slump is consistent with other business behavior, specifically weak investment spending on new plants and machinery.

Compared with the past, companies seem more reluctant to invest in the future.

"There is now robust evidence, from multiple data sources ... of a pervasive decline in U.S. business dynamism over the last several decades," says the study, which was released earlier this month.
------
http://news.investors.com/ibd-editorials-perspective/121715-785867-robert-j-samuelson-says-us-in-a-serious-startup-slump.htm