Fewer Businesses, Fewer Jobs

 Fewer new businesses are getting off the ground in the U.S., available data suggest, a development that could cloud the prospects for job growth and innovation.
In the early months of the economic recovery, start-ups of job-creating companies have failed to keep pace with closings, and even those concerns that do get launched are hiring less than in the past. The number of companies with at least one employee fell by 100,000, or 2%, in the year that ended March 31, the Labor Department reported Thursday.
That was the second worst performance in 18 years, the worst being the 3.4% drop in the previous year.
Newly opened companies created a seasonally adjusted total of 2.6 million jobs in the three quarters ended in March, 15% less than in the first three quarters of the last recovery, when investors and entrepreneurs were still digging their way out of the Internet bust.
Research shows that new businesses are the most important source of jobs and a key driver of the innovation and productivity gains that raise long-term living standards. Without them there would be no net job growth at all, say economists John Haltiwanger of the University of Maryland and Ron Jarmin and Javier Miranda of the Census Bureau.
"Historically, it's the young, small businesses that take off that add lots of jobs," says Mr. Haltiwanger. "That process isn't working very well now."
Ensconced in a strip mall behind a Carpeteria outlet, Derek Smith has been tinkering for two years with a wireless electrical system that he says can help schools and office buildings slash lighting bills. With his financing limited to what he earns as a wireless-technology consultant, he has yet to hire his first employee.