• Wed. Dec 6th, 2023

St. Louis Federal Reserve Economist Reveals High Turnover Rate Among Startups


Nov 21, 2023

An economist at the St. Louis Federal Reserve, Charles Gascon, stated that despite startups being responsible for creating many jobs in recent years, their longevity is often questionable. According to Gascon, while a majority of the jobs created from 2020 to 2021 are from new companies or startups, the net job creation for these businesses is small and can sometimes be negative due to their high likelihood of closing down within five years.

While many assume that most of these startups are tech companies, Gascon noted that in reality, they make up only a small segment. A large portion of startups are actually restaurants, small businesses, and professional service firms like law or accounting firms. The composition of startups reflects the broader industry composition of the United States, with exceptions in industries with high barriers to entry such as manufacturing or utilities production.

In addition to startups, businesses that have been around for at least 11 years also contributed significantly to the growing economy during the COVID-19 pandemic years. While there was positive net job creation from these businesses, it did not show up in the same way because many large firms laid off workers due to the pandemic and then started ramping up.

According to the Federal Reserve Bank of St. Louis, startups account for about 2% of total employment in the U.S economy. Overall, while startups create a significant number of jobs, their high likelihood of closure within five years and low pay contribute to small and sometimes negative net job creation.

Leave a Reply