Small Business Trends Spots Additional Challenge to Job Creation: Average Size of New Firms is Down


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Scott Shane of Small Business Trends took a look at the average size of new firms in the U.S., and comes to the conclusion that "startups are shrinking":


...To see what has been happening more recently, I took a look at Bureau of Labor Statistics (BLS) data. Below is a figure that shows the average number of employees at new businesses established in each quarter from the first quarter of 1999 through the second quarter of 2009. The pattern is a decline in the average size of start-ups, from 6.6 to 4.2 employees.

average number of employees per new business

The number of employees hired by the average new business may be falling over time for any of a number of reasons. But my focus today is not on why the number has declined, but the implications of the decrease. New business formation is an important source of net job creation. Because the average number of employees hired by each new business is declining, we need to create more new businesses every year to generate the same number of net new jobs.

Read Start-ups Have Been Shrinking here.


Posted 04-13-2010 8:45 AM by Graham Griffith
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