Since 2008, the number of employer businesses going under has exceeded the number of employer businesses being founded, driving down the stock of American employers. Combined with the 49 percent decline in the per capita rate of formation of new employees that occurred between 1977 and 2012, this trend has some observers worried.
Jim Clifton, the CEO of Gallup, argued in a recent article that the recent pattern is America’s “single most serious economic problem” and that “economy is never truly coming back unless we reverse the birth and death trends.”
While I agree with Mr. Clifton and others that the three-decade long decline in the new employer creation rate is distressing, I believe that the problem it reveals is more subtle than his article lets on. Taken in conjunction with other data, the decline in the rate of employer firm formation indicates primarily that American business owners are becoming less willing to hire others.