Data Point - Business Dynamism - Granite Grok

Data Point – Business Dynamism

Business DynamismOne analysis of the Not-So-Great Recovery argues that rebounds after recessions with financial crises tend to be weaker than otherwise. This is the theory posited by Carmen Reinhart and Kenneth Rogoff in their book This Time is Different. 

But that’s not quite right, according to Michael Bordo. In the paper “The Recovery of Housing and the End of the Slow Recovery?,” he focuses on the housing bust rather than the financial crisis more broadly: “Residential investment is not a large component of national expenditure but it is closely linked to the purchase of consumer durables and other housing-sensitive sectors, which stimulates consumption.”

But the housing collapse might also have led to a weaker recovery through its impact on business creation. In the paper “Slow Business Start-ups and the Job Recovery,” San Francisco Fed economists Liz Laderman and Sylvain Leduc point out that in the first year of growth following the employment bottom in the terrible 1981-82 recession, net start-up employment grew 28.3%. But in the first year after the lowest point of the 2007–09 recession, net start-up employment grew only 18.8%.”

(H/T: AEIdeas)

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