Friday, June 13, 2014

Let's have some fun

At FiveThirtyEight: The Slow Death of American Entrepreneurship by Ben Casselman. From the article:
Americans started 27 percent fewer businesses in 2011 than they did five years earlier, according to data from the Census Bureau. As a share of all companies, startups have been declining for more than 30 years.

Declining since the late 1970s. Interesting.

Among possible causes of the decline, Casselman points out that "The U.S. economy is also increasingly dominated by large corporations". By coincidence, perhaps, Casselman also mentions "the long and well-documented decline in family-owned businesses."

Trends like that don't sit well with me.

I tried to figure out what data was used for Casselman's graph, with no success. But I found some more graphs at BLS. Graphs are always fun.
The number of new business establishments (establishments that are less than 1 year old in any given year) tends to rise and fall with the business cycle of the overall economy. As shown in chart 1, the number of new establishments for the year ending in March 2010 was lower than any other year since the series began.

This graph starts out with a pretty good increase. But it starts in 1994. The pretty good increase is what we got during the good economy of the latter 1990s. If you look at the graph without thinking of that, you might imagine the same strong uptrend stretching back in time another ten or fifteen years. I doubt it.

Another feature of this graph: The drop associated with the Great Recession started in 2006. That's noteworthy.

Next, Chart 5:
As shown in chart 5, the period from 1993 to 2006 was marked by an increase in the number of births and deaths, indicating a higher amount of business “churn”—that is, new business establishments entered and old establishments exited the economy in greater numbers. Since the most recent recession began in December 2007, births have experienced the steepest decline in the history of the series. New establishments are not being formed at the same levels seen before the economic downturn began, and the number is much lower than it was during the 2001 recession.

Sure enough: new establishments are not being formed, and the number is much lower. But doesn't it strike you as odd that this is all we get in the way of commentary from the BLS? I'm not the policymaker. I'm the critic. I'm supposed to be the guy saying "Hey, the economy isn't doing well." BLS is supposed to do a little more than that, don't you think?

I also don't like it that they say things like "the steepest decline in the history of the series". The history of the series? "The period from 1993 to 2006" is only about a dozen years. The series isn't old enough to have something you could call a history. When you're old as I am, you'll understand.

Like the second graph (BLS Chart 1), the third one (BLS Chart 5) shows an early-onset decline of establishment births, 2005 or 2006. But the peak in employment gains from startups came even earlier. BLS Chart 6 (not shown) indicates that

The number of jobs created from establishment births peaked in the late 1990s and has experienced an overall decline since then.

Trends like that don't sit well with me.

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