The U.S. economy isn't creating jobs fast enough, especially because startup companies aren't forming as quickly as they have in previous recessions. Economists and business advocates said the government should help support small, growing businesses.
John Grabner, president of Cardinal Fastener and Specialty Co., Inc., stands next to a bin of large bolts inside the company's Bedford Heights, Ohio facility. Case Western Reserve University economics professor Sue Helper said Cardinal is a good example of a company that has been able to reinvent itself to create jobs in a poor economy.CLEVELAND, Ohio -- Government agencies at the state and federal levels need to do more to support small, job-creating businesses, economists and industry advocates said at a manufacturing summit hosted Friday by the Federal Reserve Bank of Cleveland.
"We're not getting new job creation, especially from startup companies," University of Maryland economics professor John Haltiwanger said.
Over the past 30 years, Haltiwanger said the U.S. economy has become less dynamic. Fewer jobs are being created or destroyed.
"This creative destruction is inherent to both job and productivity growth in the United States," he said. New, vital companies rise up while old, inefficient ones fail. The result is more jobs and more production, he added.
The declines in both job creation and destruction have gotten worse since the recession. In earlier recessions, he said, creative companies creating hundreds of thousands of new jobs.
"What was different about this recession was just how big of a hit job creation took," Haltiwanger said. Unlike earlier recessions, almost no new companies started up or expanded during the downturn.
Several economists said lack of investments from banks and private equity firms was one the reasons. With their industries in shambles, few were willing to take risks on startups.
Baiju Shah, president and chief executive of medical industry support company BioEnterprise, said state and federal governments can step in to help companies create jobs.
In Northeast Ohio, Shah said there are investors willing to help companies once they reach a decent size, but many startups need bank loans and other harder-to-obtain financing.
"We're still missing debt financing," Shah said. "Our bankers are not yet used to dealing with these kinds of firms. They don't necessarily have the collateral to back a loan in the traditional sense."
BioEnterprise wants lawmakers to create a state fund to help underwrite loans. Shah said banks in Silicon Valley and Boston have experience with these kinds of startups.
Case Western Reserve University economics professor Sue Helper said that with some creative help, many manufacturing businesses in Northeast Ohio could become vibrant employers again. By identifying new opportunities and tapping into each others' services, she said job growth could return.
But it's not easy. In successful cases, she said smaller businesses have focused efforts on marketing products and services to new clients, retraining workers, investing in equipment and improving their communications all at the same time.
"For small firms, this is very tough for a manager to be doing all of those things at the same time," Helper said.
She and Shah said governments and business support groups can help firms succeed in repositioning themselves by helping them connect with each other. Helper said her research shows that companies that discuss their difficulties with peers and non-related companies in their region tend to be 10 percent more productive than companies that don't.
Shah said that's where for-profit and non-profit organizations like his become important.
"We have to somehow create this connectivity among firms, whether it's a manufacturing company in our area or a service company," Shah said. "We have to find ways of working together."