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What Happens When the Pace of Start Ups Slows Down

Slowdown in new business start-ups is stunting job creation, Haltiwanger reports

MPRC Faculty Associate John Haltiwanger spoke to NPR on the subject of new businesses and job creation. According to Dr. Haltiwanger, new businesses represent one of the most important engines of job creation. About 10 percent of new businesses "take off" rapidly and begin to hire new staff as they grow. But in the last few years, there have been fewer new businesses. In fact, new businesses are starting up at the lowest level in 25 years.  Today, new businesses make up only about 7 or 8 percent of the total number of businesses, as opposed to 12 or 13 percent a few years ago. This means that there are hundreds of thousands fewer business start-ups than there used to be, and therefore fewer new jobs.

This slowdown in new business creation spells trouble at a time when millions of Americans are still looking for work. "Young firms got really hammered in the Great Recession, and they've been very slow to recover," Dr. Haltiwanger told NPR.

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