July 23rd, 2011
Econintersect: A new study issued by the New York Fed shows that businesses under 50 employees suffered disproportionately in the 2007 recession. The study concludes:
The 2007-09 downturn has had a deeper employment impact on small businesses than on large ones. Small firms attribute the relatively steep decline in jobs mostly to poor sales and economic uncertainty—problems that also affected large firms, but to a lesser degree. Tightened access to credit and adverse financial conditions also constrained small firms but a more important factor was the decline in new investment and associated financing in the face of weak consumer demand for the fi rms’ products and services.
The recovery of small businesses is a significant component of job creation and the overall economic recovery. Our findings do not imply that credit availability is unimportant for small and young firms. Rather, as sales conditions improve and credit demand picks up, access to credit by small firms will help ensure that high-potential businesses and entrepreneurs can thrive.
Federal Reserve studies tend to try to blame credit having a hand in everything. Econintersect has published analysis Employment Growth All From Small & Medium Business Since 2000 showing there was no growth from big business (a big decline in fact) coming into the 2007 recession. This fact was missed in the study.