The Declining Business Dynamism in the United States

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What's going to put Americans back to work? Government or Private Business?

There is no doubt that regulatory pressure and unnecessary regulations hinder entrepreneurship. I would think an easing of those pressures could and would revive the private sector. But good luck getting the bureaucrats and the big government folks to go along with that.

One of the big reasons our economy continues to lag badly can be found in the chart below.

May 5, 2014

Declining Business Dynamism in the United States: A Look at States and Metros

By: Ian Hathaway and Robert E. Litan

Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation.

But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech.

Here, the geographic aspects of business dynamism are analyzed. In particular, we look at how these trends have applied to the states and metropolitan areas throughout the United States. In short, we confirm that the previously documented declines in business dynamism in the U.S. overall are a pervasive force throughout the country geographically.

In fact, we show that dynamism has declined in all fifty states and in all but a handful of the more than three hundred and sixty U.S. metropolitan areas during the last three decades. Moreover, the performance of business dynamism across the states and metros has become increasingly similar over time. In other words, the national decline in business dynamism has been a widely shared experience.

While the reasons explaining this decline are still unknown, if it persists, it implies a continuation of slow growth for the indefinite future, unless for equally unknown reasons or by virtue of entrepreneurship enhancing policies (such as liberalized entry of high-skilled immigrants), these trends are reversed.

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What has this administration done in 5 plus years to address this problem? And yes I can ask that question because this is the administration that has been in power for over 5 years. Remember Recovery Summer? Remember Sheriff Joe being on the job?

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This goes along somewhat with the initial post.

Can We Build Entrepreneurs?

Posted by Jeff Carter

on May 7th, 2014

Carl Schramm is someone I respect. I have heard him speak, and read a couple of his books. He writes an editorial today saying that colleges cannot teach entrepreneurship, and probably shouldn’t. He calls for an evidence based outcome approach similar to what medicine has. I am all for data based feedback. But, entrepreneurship isn’t medicine. It’s messy.

Medicine generally has a linear path. Invent drug to do something. Test it. See if it works. Works? More testing and then application in the field via prescription.

I agree that we can always teach entrepreneurship better. There should be some core concepts that professors teach to help entrepreneurs organize. The Business Model Canvas is excellent. I also like Eric Reis thoughts in The Lean Startup.

The other thing we can teach better are basic business skills. Accounting, marketing and operations. Especially marketing! If it doesn’t sell, the company doesn’t gel. Too often classes get tied up in the financing because financing is sexy and emotional.

Schramm makes a good point, most businesses do not need venture capital. Instead, the entrepreneur ought to dip into savings, or get money from angels if they have none. Start the business and learn on the job. Most businesses in America are what we would call “lifestyle businesses”. They provide a nice income stream for their owner, but won’t toss off dividends or be acquired by someone else.

President Reagan may never said anything so true as this,

Entrepreneurs and their small enterprises are responsible for almost all the economic growth in the United States.

We are seeing less entrepreneurial ventures get started nationwide. That doesn’t have anything to do with the way we are currently teaching entrepreneurship. It has everything to do with current government attitude toward businesspeople, and the failure to teach children what it means to be an entrepreneur. I doubt that there is much on risk/reward and being a capitalist in the new core curriculum everyone is up in arms about.

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I mentioned this in another post but one would think with the Federal reserve pumping $billions of liquidity into the economy every month which keeps the cost of borrowing money at historically low rates and the inexpensive cost of information and communication technologies that new business start ups would be spiking at all time highs. Amazingly, Mr Hope and Change - "you didn't build that" and his intrusive regulatory policies, ObamaCare requirements and his corporate tax rates, start ups are at historic lows.

Undeniably the most anti-business president of all time. His policies seem to indicate he entertains ideas that american businesses are his enemy.

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The One Chart That Shows Just How Stuck Our Economy Is

(EPI)

The U.S. jobs picture is bleaker than the most recent jobs reports may make you think. The economy added 175,000 jobs last month, but at the rate things are going, it would take almost a decade to get back to prerecession employment levels. A Job Openings and Labor Turnover Survey report released Tuesday by the Bureau of Labor Statistics digs in on the bad news: The number of job openings in the U.S. actually fell by 118,000 in April to 3.8 million.

How bad can 3.8 million job openings be? The Economic Policy Institute looks at the number and sees that "the main problem in the labor market is a broad-based lack of demand for workers—and not, as is often claimed, available workers lacking the skills needed for the sectors with job openings." To bolster this point, they put forward this chart:

In every industry, the number of unemployed workers outpaces the number of job openings. To state the obvious: To get that disparity to dramatically shrink, we've got a long way to go.

Use the link to see the charts.

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An improving economy generates a lot more jobs than what we have now and at a pace that it is actually competing for workers. It is obvious, that’s not the case in this economy, nor has it been the case for a long time.

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Actually there is something the federal government and this administration could do to help the job situation. http://blog.heritage.org/2014/05/08/federal-government-holding-back-oil-production-federal-lands/?utm_source=facebook&utm_medium=social