ABSTRACT FROM THE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE MAY 2014 EDITION

While older firms are important with regard to employment levels, it is new and young businesses (i.e., less than one year old) that are a key source of job growth. The U.S. economy is comprised of more than 6 million establishments with paid employees. The status of these businesses is constantly churning — some grow, others decline, and yet others close. New businesses replenish the pool of establishments with paid employees; since 1977, newly born companies created 3 million jobs per year on average. As we discuss, these 3 million new jobs exceed total average annual job growth overall, reflecting job destruction by mature firms.

Michael Geraghty is the Global Markets Strategist at Cornerstone Capital and formerly the founder of Informed Investor, LLC a consultancy specializing in thought leadership that produces bespoke research reports for institutional investors. Michael has over three decades of experience in the financial services industry including working as an investment strategist at UBS and Citi.