Yes, the title reads right…Q1 2008… these are some very backwards looking statistics but today I’d like to introduce into the rotation these little followed data series as an additional means of detailing the state of American businesses.
The Business Employment Dynamics data is generated from the Quarterly Census of Employment and Wages and captures, among other things, the number and percentage of firms expanding and contracting, opening and closing establishments and experiencing net job gains and losses.
The data is somewhat suggestive of the secular bear market economy theme in that it is readily apparent that businesses never again reached their 1990s era strength after weakening fundamentally during the early 2000s “dot-com” bust.
Worse yet, business dynamics appear now to be weakening even further.
As you can see from the charts below (click for larger) while the number of firms with gross job gains declined during the “dot-com” bust and expanded again during the housing bubble era, the percentage of firms with gross job gains has been eroding throughout the entire period.
Further, it’s more than likely that the erosion has been particularly severe through the remainder of 2008 and into 2009.
The percentage of firms with gross job losses, having declined notably in the wake of the “dot-com” bust now appear to be indicating a notable acceleration.
Firms opening and expanding establishments and closing and contracting establishments also shows the telltale signs of underlying systemic weakness.
Notice that the percentage of firms expanding is at its lowest point in at least 16 years, while the percentage of firms contracting appears to be on the rise.
Finally, the percentage of firms opening establishments is at a cyclical low while the percentage of firms closing establishments appears to be increasing notably.