Recent employment data indicate a robust yet complex recovery for the American economy as it navigates the post-COVID landscape. Bruce Yandle, an economist and adjunct fellow at the Mercatus Center, highlights in his analysis that while employment figures reflect significant strength, the sectors driving this growth do not align neatly with the pre-pandemic economic framework.
Yandle draws a parallel to Gertrude Stein’s famous remark about her childhood hometown: “There is no there there.” He suggests that although traditional sectors like manufacturing are lagging, others, notably healthcare and government roles, buoyed by substantial federal spending, have surged. These areas, however, contribute to a reliance on increasing federal debt, which has escalated from $23.1 trillion in early 2020 to approximately $35.4 trillion.
The employment recovery, marked by rising real wages and a low unemployment rate, has been largely concentrated in just three industries: leisure and hospitality, government, and healthcare. Together, they accounted for a striking 75% of payroll employment growth tracked by the Bureau of Labor Statistics over the last year, a stark rise from the 45% share they held prior to the pandemic.
Amidst this backdrop, Yandle underscores the emergence of a vibrant trend in entrepreneurship as a silver lining. The surge in new business applications, which began during the pandemic, continues to thrive, with the Department of Commerce reporting 448,000 applications in November 2020 alone, compared to the previous monthly rate of around 300,000. Approximately 28,000 of these ventures are expected to have payrolls within a year, illustrating a shift toward self-employment and entrepreneurial initiatives as individuals seek financial independence and innovation in a changing economy.
While acknowledging that many of these start-ups may not endure, Yandle cites a McKinsey Global Institute analysis that suggests small businesses—defined as those with fewer than 500 employees—account for nearly 40% of the nation’s value added and have been responsible for almost 50% of U.S. industrial output over the past quarter-century. This trend indicates a potential pathway to future prosperity, with successful start-ups like Amazon, Dell, and Starbucks having all originated as small enterprises.
Furthermore, a study by the National Bureau of Economic Research suggests a correlation between the number of new business applications and GDP growth, indicating a potentially more promising economic forecast predicated on this surge in entrepreneurship.
In summary, the current state of the economy, while not a replication of pre-pandemic conditions, reveals a landscape marked by resilience and opportunity, especially in the realm of small business development. As the nation adapts and evolves in this new context, it appears that the entrepreneurial spirit may pave the way for future growth and innovation.
Source: Noah Wire Services