Key Engine for US Job Creation is Broken

Entrepreneurs who can take risks and form new businesses are critical to stimulating job creation. This is because new start ups and small businesses are the source of more than half of all new jobs in the US.

Unfortunately, according to the Global Entrepreneurship Monitor, in many developed nations the number of people starting new companies is down substantially, and in the US it’s down 24 percent since last year.

As described by The Wall Street Journal:

“Confidence alone isn’t sufficient to create new jobs in an economic downturn, and the drop in new businesses highlights the difficulties faced by the job market. About half of the U.S. work force is employed by small firms.”

A slowdown in new businesses creation seems natural in an economic downturn, but an overall flagging entrepreneurial spirit is one more strong reason it’s difficult to be optimistic about the economy for the foreseeable future. See more information and a chart in Real Time Economics’ coverage of the tumble in business formation.

The Daily Reckoning