Job creation by entrepreneurs at historically low levels

Bloomberg reported that the Small Business Optimism Index reached it's highest level since 1983. Read Bloomberg's story here.

Our experience with small business is a little different.  So we went to go check in with the US census on the state of small and new business.

We found the the web page of the US Census on "Entrepreneurship and the US Economy." The page collects statistics on small and new businesses. The produce a great set of charts showing how job creation by new business and fallen off since 1997. The numbers tanked during the last recession in 2007. Read the story here.

The web page has a bunch of great overview charts with links to the statistics. Charts 1,2 and 7 capture the issue.

(Chart 1). Shows the number of new businesses trending up after the recession, but (Chart 2) the number of jobs created by new business is near it's all time low.  New businesses are creating far fewer jobs than the peak in 1997.  Chart 7 shows the majority of jobs for new business are created by firms larger than 250 employees while the number of jobs created by firms 1-250 has been decreasing. The trend accelerated during the recession.

The charts tell us that many "new" business are just freelancers

Basically, it looks like many of new firms are just freelancers and contract employees forced to start firms. They have no intention of growing a business.  They simply want to get paid by an employer looking to avoid paying benefits.

Second, real job growth is coming from larger firms which are over 250 employees. Small businesses are being squeezed out.  They are not generating jobs the way it used to. Where the change is structural or political remains to be seen.

Examples of structural factors favoring larger businesses include complex IT systems, legal compliance or minimum size requirements for suppliers.

Examples of political factors include lack of anti-trust enforcement.