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District digest : Economic trends across the region

  • Economics
  • Political Science


Small Business Employment in the Fifth District and the Impact of Recessions 36 R e g i o n F o c u s | F i r s t Q u a r t e r | 2 0 1 0 Small business firms are widely regarded as a key sourceof job growth and as largely recession-proof, but thecurrent recession brought severe job losses even to relatively high-growth regions like the Fifth District. Of course, small businesses are constantly being created and destroyed both in and out of recessions, with job growth perhaps slowing during recessions, but rarely have small businesses as a category suffered net job losses. The current recession, which continues to generate employment declines into 2010, is a notable exception to the historical pattern of uninterrupted small business job growth, with significant job losses occurring even in the high-growth services sector. While a clear picture of the severity of the recession in the Fifth District can be seen in the available data on government employment, data on the performance of small businesses at a regional level are limited. Fortunately, survey data of small business firms from the National Federation of Independent Businesses (NFIB) provide interesting insights into the problems small busi- nesses faced during past recessions and, to some degree, how the surviving firms adjusted to such difficult times. Combined with the government data, this survey allows a close look at the performance of small business firms in the Fifth District during three recessionary periods over the last 20 years. Defining a Small Business Small businesses play a major role in job changes over any business cycle, but their exact definition often varies among studies. The Small Business Administration (SBA) defines a small business as any establishment with less than 500 workers. That casts a pretty large net across the labor market. By that definition, more than 99 percent of all establish- ments would be classified as a small business. It also means that more than 80 percent of all jo

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