A great deal of attention over the last year has been focused on the “anemic” economic recovery and the “stubbornness” of unemployment. Why can’t we get people back to work? Why can’t we get unemployment under 9 percent? What will it take to get businesses to hire?

In the aftermath of the worst recession in two generations, this focus is quite natural, but the personification of the problem — as if the labor force were a recalcitrant teenager “stubbornly” refusing to do his homework — is not a very useful analogy for understanding the problem.

A better, or at least more useful, way of looking at the problem — particularly in Maine — is business formation.

Between the fourth quarter of 2007 and the fourth quarter of 2009, employment in the U.S. as a whole (as measured by a survey of establishments filing payroll reports) fell by nearly 9 million. This amounted to a decline of 6.4 percent.

Over the same period, the number of establishments reporting that they employed one or more persons dropped by just over 47,000. This amounted to a decline of 0.5 percent.

How much this change was the result of businesses closing (the death rate) compared to new businesses forming (the birth rate) cannot be determined from the data.


It’s just clear that the total number of enterprises providing jobs dropped by 47,000 over the period.

In Maine, the pattern was quite different — our job loss wasn’t as bad as the nation as a whole, but our business loss was much worse.

Over the period of December 2007 to December 2009, Maine lost just over 29,000 jobs, or about 4.8 percent of the December 2007 base.

Relatively speaking, our employment loss (4.8 percent) was only three-quarters as bad as the national loss (6.4 percent).

But over that same period, Maine lost nearly 1,700 employers — businesses and nonprofit enterprises, all organizations reporting a payroll. This amounted to 3.3 percent of our December 2007 base, and was nearly 640 percent greater than the overall national loss of 0.5 percent.

In a word, Maine didn’t just lose jobs, we lost businesses. We lost the enterprises that provide jobs. The question, “How do we get business to hire more people?” is irrelevant for the business that no longer exists. It isn’t going to be hiring anybody no matter what we do.


The interesting question here is, “What’s the reason for this net decline?”

Is our business death rate higher than average? Or, is our business birth rate lower than average? Unfortunately, that answer isn’t evident in the data reported.

The Department of Labor simply says, “This is the number of reports we got in 2007, and this is the number we got in 2009.”

We would have to get individual company IDs to figure out how many ceased to exist and how many came into existence over the period.

Whatever the reason, it is interesting (perhaps depressing) to observe that in this loss of employment-generating enterprises, Maine is the worst in New England and the sixth-worst among all 50 states.

Our 3.3 percent loss of establishments exceeds Rhode Island’s 2.4 percent; is double New Hampshire and Vermont’s 1.7 percent; and triple Connecticut’s 1.1 percent.


Massachusetts, interestingly, actually experienced an increase in reporting establishments. While the Bay State lost 133,000 jobs over the period, it saw a net increase of 2,154 reporting establishments.

The overall point to be drawn from this quick look at the employment data is that economic recovery in Maine depends more than elsewhere on a rejuvenation of the entrepreneurial spirit. We need more people to make the jump and start a new business.

Had we been able to keep our loss of establishments to even 2 percent, and each surviving business been able to employ even two people, the result would have been more than 2,000 additional jobs in 2009.

In one company, that would be headline news. In a thousand silently closed enterprises, it’s no news at all. But it’s a terrible loss to our economy.

Charles Lawton is senior economist for Planning Decisions, a public policy research firm. He can be reached at:

[email protected]


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