Don's Tuesday Column 9-13

              THE WAY I SEE IT   by Don Polson  Red Bluff Daily News   9/13/2016

            Where do jobs come from? 

Fifteen years ago, we watched the riveting, abominable images of radical Islamic terrorist attacks in New York and Washington. Heroic passengers in a doomed plane thwarted a third attack over Pennsylvania. Insufficient resolve, political correctness and foolish intransigence in our counter-terrorism apparatus leave us less safe—as San Bernardino and Orlando have shown. God (and our leaders) willing, we will defeat terrorists where they breed their jihadist plots.

You, someone in your family, or someone you know may be unemployed but ready, willing, able and seeking work. Economic freedom is restricted either by one’s skills or, more likely, by the lack of openings in the job market. Economic ability and freedom, for companies to grow, limits the options of not only businesses but also would-be employees.

Many are depending on existing employers letting someone go, replacing someone who quits, or are depending on someone hiring for a new business. Some marshal their skills and knowledge, and provide a product or service of their own making to consumers.

In every case, people depend to some degree on the health, vibrancy, flexibility and, yes, freedom of the economy. The Gross Domestic Product growth rate, the rate of unemployment and those who’ve given up and left the work force, the number of businesses starting, growing, giving up, closing and failing—all impact your income, budget and health.

The indicators mentioned above point to the “elephant in the room”: Obama’s pathetic recovery, relative to any other recovery in 70 years. I’ve written of the irrefutable facts: GDP has grown at half the rate of other recoveries, contributing to a weak economy that produced fewer goods, services and jobs than Americans rightfully should have expected.

Unemployment rates look good on the surface but—when the long-term unemployed and those who’ve dropped out of the job market are factored in—rates are two times higher. We have the highest levels of those no longer in the work force since the 1970s. Plus, cumulative jobs created under Obama have failed to keep pace with the population growth of the labor force.

All are worse than even President Bush’s tepid recovery, decried as a jobless recovery (even though unemployment was comparable to Obama’s rates). Jobs lost during Bush’s first years were fully recovered, and then some, before the 2008 financial crash. Recovering lost jobs took longer under Obama and subsequent job growth has been marginal (all per BLS figures).

With all of that as context, let’s look analytically at business growth, start-ups and failures over recent history. In September of 2014, J.D. Harrison wrote, “More businesses are closing than starting. Can Congress help turn that around?” He summarized the testimony, before the House Small Business Committee, of John Dearie, executive vice president of the Financial Services Forum, a trade organization in Washington, D.C.

In terms of the start-up economy, he said, “all signs are flashing red. Americans are starting fewer businesses, new companies are going out of business more quickly, and the new firms that do get off the ground are creating fewer jobs. None of that bodes very well for an economy still trying to find its footing. America’s entrepreneurs need help.”

“Dearie cited research in his testimony showing that new firms historically account for virtually all net new jobs generated each year in the United States (rather than small businesses in general). However, their annual hiring contributions have dropped about 40 percent since 2000, accelerating a downward trend that has been going on for the past three decades.

“In part, that’s because the number of new businesses has steadily declined. Data from 2011 showed that only 8 percent of companies are less than one year old, down from 15 percent of all firms back in the 1970s, with a particularly sharp decline taking place during and in the years immediately following the Great Recession. Meanwhile, the number of young firms going under within the first few years has increased. Consequently, for the first time in 30 years, business deaths now outnumber business births, according to the U.S. Census Bureau.”

More recently, Michael S. Malone wrote “A Lost Generation of American Entrepreneurs” (6/2/2016, Forbes). He cited a report by the Economic Innovation Group that “the years 1992 to 1996 saw a net increase in the U.S. of 421,000 new businesses, and 2002 to 2006 saw 405,000 new companies; however, the comparable interval from 2010 to 2014 saw just 166,500.” There was a year-over-year loss of new companies in 2009, 2010 and 2011.

“In other words, the American economy is about 300,000 new start-up companies short as we stumble out of the long aftermath of the 2008 Great Recession…How many Amazons, Facebooks, and Ubers were in those thousands of lost companies because they never gained financial traction, were crushed by regulations, or were never started at all?

“These results are yet one more reminder that among the various legacies of the Obama Administration, this one—the loss of a generation of new entrepreneurs, their start-up companies, and the millions of jobs they might have created—may be the most enduring.” The percentage of adults under age 30 owning or involved in “privately-held business is just 3.6 percent, the lowest in 30 years—half that of 2010, and a third of 1989’s figures” (per the Federal Reserve).

Suggestions for Congress, and the next president, from Dearie and business experts: 1) Overhaul the immigration system, 2) Help rein in student debt, 3) Reduce regulatory burdens, 4) Increase access to capital, 5) Create a start-up tax status. One can support those broad concepts; details are needed; timely, effective policies are crucial.