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Kauffman Foundation Report: Startup Job Creation Remains Resilient During Recessions, But Company Numbers Decline

  • Kauffman Foundation looks at four recent recessionary periods to analyze business trends during and after economic downturns
  • Report looks to provide insight on how business recovery might proceed after the COVID-19 pandemic
  • Startup job creation remains resilient during recessions, but fewer new companies are established during these periods

Summary by Dirk Langeveld

The Kauffman Foundation has issued a report on entrepreneurial trends during and after recessionary periods, saying past trends could offer insight on how businesses will fare in the aftermath of the COVID-19 pandemic.

The working paper scrutinizes four recent recessionary periods: the “double dip” recession of the early 1980s as well as the recession of 1990-1991, the 2001 recession, and the Great Recession of 2007-2009. The report also looks at differences between startup companies (less than one year old) and older companies, as well as differences between younger firms (five years old or younger) and older firms.

Researchers determined that net job creation by startups remained stable during recessionary periods, while the job creation among older businesses was more closely tied to economic cycles. However, the number of new startups fell during recessions before bouncing back in the intervening periods.

While the number of both older and newer businesses fell during recessions, the indexed number of older companies has been increasing steadily over time. The same trend does not hold true for startups, whose numbers have fluctuated considerably in recent decades.

These trends compound an existing decline in startup jobs. The report cites previous research noting how there have been notable declines in the share of new businesses that become employers within their first eight quarters, the average job creation for startups in their first year, and the relative job creation contribution of new businesses.

The report found that the number of firms and net job creation generally rebounded at least to pre-recessionary levels after the economy recovered. However, the number of startups and younger companies did not rebound to this level.

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