Do start-up businesses really create a lot of jobs?

Not anymore.

At least according to a recent report from the US Bureau of Labor Statistics. The number of jobs produced by start-ups has been gradually declining for about a decade. They really got hit hard during the current recession. Check out the chart below (click on it to enlarge).

As you can see, the trend here is for firms that are less than a year old.  That is the first caveat with this analysis:  it may take a start-up a few years before it really hits the job generation phase.  Also, the article points out that some of the decline is due to the fact that each year there were fewer and fewer firms created and therefore fewer and fewer firms less than one year old.  On the other hand, during this same time period, jobs created per firm declined steadily from about 7.5 in 1994 to 4.9 in 2010, so the decline in job generation for firms less than a year old is real.

However, some of this change may be due to changes in technology (e.g., cloud computing and similar applications eliminate the immediate need for support personnel) as well as changes in the types of firms that were started in the past decade (information technology firms will have need for fewer employees than, for example, construction firms). But it is an important trend to watch.

You can read the BLS report here.

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