That Bloomin' Economy

My 4 ½-year-old daughter recently embarked on a gardening project at preschool, which found its way home as a dirt-filled pot. She promptly placed it smack in the middle of the dining room table as the not-yet floral centerpiece.

"What's this on the table?" my puzzled husband asked when we were getting ready for dinner a few weeks ago. My daughter replied: "It's paperwhites. They're in there. You know, growing."

"It does look like a paperweight," he said, which prompted the wail: "No, not a paperweight, a paperwhite!" But I think she's overheard me on a few too many interviews, because she added: "It's dirt now, but give it a chance. It's a startup."

Paperwhite LLC turned into a fine looking bouquet and spurred the job creation of a constant waterer.

I'm happy to report that the nation's leaden economy is being lifted by other, less dirt-filled startups.

A new Kauffman Foundation-funded U.S. Census Bureau study reports that startup companies are a major contributor to job creation. The statistics also indicate that while business startups decline slightly in most of the cyclical downturns, they remain robust even in severe recessions, according to the sample period of the early 1980s.

"Our research into the early years of business formation consistently shows how vital new firms are to our economy, and this data should give policymakers and budding entrepreneurs alike great hope for how we can solve our current crisis--create and grow jobs through entrepreneurship," said Robert Litan, a vice president with Kauffman.

The data show that employment accounted for by U.S. startups from 1980 to 2005 was about 3 percent per year. That's a small fraction of overall employment, but the jobs from startups reflect new jobs, which is a large percentage compared to the average annual net employment growth of the U.S. private sector for the same period -- about 1.8 percent. This pattern suggests that -- if you exclude the jobs from new firms -- the U.S. net employment growth rate is negative on average, according to the study.

Firms with one to four employees accounted for a large percentage of new jobs in any given year -- about 20 percent on average. Although substantially larger startup firms (those with 250 to 499 employees) created a considerably smaller percentage of jobs -- about 1.3 percent of employment -- their numbers are substantial relative to net growth.

By Sharon McLoone |  January 26, 2009; 1:55 PM ET
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Sharon,

I love the story about your daughter's paperwhite. It's a good reminder that there are still many flowers being planted and blooming in the small business world, even in this economic crisis.

Best,

Heather Stouffer
Founder
www.mommadefoods.com

Posted by: hrstouffer | January 29, 2009 1:23 PM

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