January 5

Charles Lawton: Forget jobs for now; let’s focus on business formation

The Great Recession killed off nearly 5 percent of Maine’s job providers.

The primary measure of our economy, any economy, is jobs. How many jobs have we created? What is the unemployment rate? Should we extend unemployment benefits for those without jobs? What can we do to create more jobs?

Because jobs are so important and relatively easy to count, we spend a lot of time fussing about jobs numbers. I think it would serve us well to give those worry beads a rest for a bit and focus more on the other side of the jobs equation: the employer. In the term used by the Department of Labor, this is the “establishment,” the entity filing the payroll reports that provide our measure of the jobs numbers we worry about so much.

In the first quarter of 2003, Maine had 46,431 reporting “establishments.” These were the for-profit businesses, the nonprofit enterprises, the government agencies, all the enterprises that paid people to do work and filed payroll taxes on those payments. These were the crucial job creators. By the fourth quarter of 2008, the number of these job providers had increased to 51,273, an increase of just over 10 percent. This growth in job providers was nearly the same as the 11 percent increase for the U.S. as a whole.

Over the next five quarters, however – all four quarters of 2009 and the first quarter of 2010 – the number of job providers in Maine fell to 48,972, a decrease of 4.5 percent. This drop was nearly double the 2.3 percent drop for the U.S. as a whole. In other words, the Great Recession killed off more job providers in Maine, in relative terms, than in the U.S. as a whole.

Since that early 2010 low point, the number of job providers has increased – both in Maine and in the U.S. as a whole. In Maine, their number rebounded to 49,403 in the second quarter of 2013, an increase of 0.9 percent. For the U.S. as a whole, the number of job providers rebounded 3.6 percent – fully four times the “recovery” seen in Maine. In other words, the Not-So-Great Recovery has been even less great in Maine, in relative terms, than in the U.S. as a whole.

Had Maine’s job provider “recovery” matched the growth rate of the U.S. as a whole, we would have had 1,340 more “establishments” last June than we did. And, if those imaginary establishments had mirrored the Maine average number of jobs per establishment, we would have had 15,715 more jobs. Had these imaginary jobs paid the average annual 2012 payroll of $38,606, we would have nearly $607 million in additional income. Had this imaginary income paid the average 12.2 percent in state and local taxes reported by the U.S. Bureau of the Census, we would have had over $74 million more to pay for assistance for low-income earners, job training, education, and to provide for property tax relief.

To recall the old saw from former Gov. Joe Brennan, “There’s no better social program than a good job.”

And to take that thought a step further, “Behind every job, good or otherwise, is a job provider.”

In sum, the Great Recession killed off nearly 5 percent of Maine’s 2010 job providers, and we have made very slow progress in rebuilding that foundation of our economy. Our mantra going forward should be, “Business formation, business formation, business formation.”

Charles Lawton is chief economist for Planning Decisions, Inc. He can be reached at:

clawton@planningdecisions.com

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