Saturday, May 30, 2015
Start-Ups and Stand-Downs
If there is an economic recovery, if we take out the wealth flowing merely to the top 5% of the money ladder, it is at best a sputtering effort. Too many low-end, low-paying jobs are filling the employment statistics, and hope has left the building for vast numbers of “average” Americans. Student loans are pulling too many young people out of spending to help grow the overall economy. Too many people have given up looking for work, falling out of the statistics entirely.
For those who believe that the United States is “out of the woods” comes this sobering news: “The U.S. economy shrank at an annualized pace of 0.7 percent in the first three months of the year, according to government data released Friday morning, a tumble for a recovering nation that until recently seemed poised for takeoff.
“The contraction, the country’s third in the aftermath of the Great Recession, provides a troubling picture of an economy that many figured would get a lift from cheap oil, rapid hiring and growing consumer confidence. Instead, consumers have proved cautious, and oil companies have frozen investment — all while a nasty winter caused havoc for transportation and construction and a strong dollar widened the trade deficit.
“The numbers released [May 29th] were a revision of earlier figures that had shown GDP growing in the first quarter at 0.2 percent. Markets had since expected the downward revision, in large part because of recent data showing the trade deficit at a 6½-year high.” The Washington Post, May 29th.
With a contracting middleclass, and numbers now swelling the lower economic rungs of that ladder, where are the other sparks of economic effort that tell us where we are? How about entrepreneurs and their start-ups? That’s the American way. How do numbers in that category reflect the economics of our nation?
The Ewing Marion Kauffman Foundation has been tracking U.S. start-up trends over the past decade, and there is definitely a link between the overall economy and the number/success of start-ups. The above contraction is bad news here as well, but it will take some time until we can track the actual results. We’re not just talking about those garage, high-tech social media ideas, but folks opening restaurants, creating little service jobs, taking craft-making hobbies to the marketplace, generally starting a business versus getting or holding a job. Some are just born entrepreneurs. Others have turned to starting a business because they cannot find a job.
The most recent Kauffman Index was released on May 28th. The Foundation has noted that the rise and fall of start-ups is rather directly tied to the overall economy. In other words, new businesses tend to grow more when the economy is good than when it is sliding down. Today, we are seeing more start-ups, about 310 for every 100,000 adults are starting a new business every month these days. That’s up from 280 in 2014, but still below historical norms.
As for new business that actually employ other people, those numbers didn’t move the needle much either, going from 128.8 per 100,000 in 2014 to a slightly larger 130.6. Shaky numbers at best, but at least moving in the right direction.
It is equally interesting to note who those entrepreneurs are, as the Index summary states: “Most new entrepreneurs – 63.2 percent – were men. The 36.8 percent of females who became entrepreneurs in the 2015 Index is close to the two-decade low of 36.3 percent in the 2008 Kauffman Index. The rate of new entrepreneurs grew for all age groups except those aged 45 to 54, which experienced no change in the 2015 Index.
“All racial and ethnic groups – particularly Latinos – experienced increases in the rate of new entrepreneurs between the 2014 Index and the 2015 Index. The Latino share of all new entrepreneurs rose from 10.0 percent in 1996 to 22.1 percent in 2014. The Asian share also rose substantially during this period. The share of white entrepreneurs declined over the past 18 years, and the black share increased slightly.
“A growing immigrant population and the high likelihood of immigrants becoming entrepreneurs contributed to a rising share of new immigrant entrepreneurs: 28.5 percent of all new entrepreneurs are immigrants in the 2015 Index, compared to 13.3 percent in the 1997 Index.
“Opportunity entrepreneurs, those who were not unemployed and not looking for a job before they started their new ventures, was 79.6 percent of the total number of new entrepreneurs. This number represented an increase over the 2014 Index, and was substantially higher than in the 2010 Index, when the number of opportunity entrepreneurs was at the lowest rate since the Kauffman Foundation began collecting this data in 1996.” As the United States has become a “majority of minorities” in race and ethnicity, it is not surprising to see the increases in immigrant, Asian and Latino new businesses.
The contraction of white entrepreneurs, however, is greater than the reduction of the percentage of whites as a function of the entire population, a disturbing trend. This can explain a growing chorus of dissatisfaction among traditional white voters, losing a grip (and hope?) on their own country, facing the challenge of global competition and a compete rewriting of the rules of the game. As they push against change, from Tea Party stalwarts to more radical groups opposed to anything but white Protestant values, bubbles of social disruption and violent reactions are much more common than we have seen in decades.
The one missing ingredient in all this is a notion of “we’re all in this together.” Instead, we have the blame game. Immigrants are bad. Gays are bad. Universal healthcare is bad. Government regulation is bad. Taxes are bad. Minorities need to yield in power to white traditional values. We’re seeing racially-motivated riots, entire cities filing bankruptcy, costs for basics skyrocketing, weather patterns adding further challenges to daily life and a notion that the American dream is no longer achievable for the next generations. And if we cannot figure out how to pull together as a unified nation, then we’re not that far away from no longer being one!
I’m Peter Dekom, and looking at the underlying trends in our nation should give us a reason to want to take care of each other… and if we don’t….