Nonemployer Starts Mirror Job Losses
Jan 4th, 2010 | By Dawn R. Rivers | Category: ResearchThe most significant determinant of nonemployer firm births is the condition of the labor market, according to a new working paper released last month by the U.S. Small Business Administration, Office of Advocacy. The final Advocacy release of 2009 was entitled The Nonemployer Startup Puzzle, written by Advocacy’s Brian Headd, and Zoltan Acs and Hezekiah Agwara of George Mason University, with funding from Advocacy. For this research, the authors used special tabulations produced by the U.S. Census Bureau from its nonemployer statistics. Specifically, Census matched individual nonemployers longitudinally to determine exit and entry by major industry and state, for data years 2002 through 2004.
The authors found that nonemployer entry rates were 34.3% and exit rates were 29.6%, leaving a net population growth rate of 4.7% from 2003 to 2004. Unsurprisingly, entry rates for nonemployers are nearly three times that of employer firms (12.6%), while the net population growth rate for nonemployers was more than double that of employer firms (2.1%). Nonemployers and employers were alike in some ways with respect to their respective firm dynamics. However, while employer entry rates seem related to macroeconomic factors such as gross domestic product, nonemployer startup rates appear to be countercyclical, closely tied to and affected by state unemployment rates.
