Startup Job Creation: Why This Recession Was Different

We all knew the job numbers were bad during the Great Recession, but now we know just how bad -- especially for startups.

In short, the Great Recession hurt startup hiring more than any other recession since the early 80s.

In 2009, when the Recession was at its worst, overall job creation fell 25 percent (compared to 2006) -- its lowest level since 1980, according to a report released today by the Ewing Marion Kauffman Foundation, a nonpartisan organization that promotes entrepreneurship.

That may not seem all that surprising (after all, we were bracing for what many economists were calling a "second Great Depression"), but now we have a clearer picture on just how much startups and new firms put the brakes on hiring: Job creation among these businesses fell 34 percent.

According to Kauffman, all recessions since 1980 have experienced the same trends -- a higher rate of layoffs for at least a year, plus a falling rate of new job creation. But this time around the decline in new jobs was particularly huge.

This is definitely different from what we saw between 1999 and 2002. Back then, there was a large drop in overall employment, but only a modest decline in startup hiring. And overall job creation actually increased. In that case, the overall decrease in net employment figures was driven by job destruction, not a falling creation rate.

There is a (somewhat) brighter spot in all the doom and gloom: Even with the large overall decline in jobs, U.S. companies managed to create more than 14 million jobs between March 2008 and March 2009. But now we know it wasn't the startups doing the hiring.

Note: The Kauffman Foundation report is based on the Census Bureau's Business Dynamics Statistics, an annual series that provides data on U.S. business dynamics, including details like firm age and size. The Foundation partially funds the BDS.
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