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Entrepreneurship Metrics - Kelly Edmiston

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This presentation was part of the Growing Entrepreneurial Communities Summit, a practitioner-focused summit designed to help economic development and small business practitioners effectively create economic growth through entrepreneurship in local communities. The 2018 Summit, subtitled Entrepreneurship on the Edges, focused on providing information and practitioner insight in how to effectively develop disadvantaged urban and rural communities using entrepreneurship-led development strategies.

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Entrepreneurship Metrics - Kelly Edmiston

  1. 1. FEDERAL RESERVE BANK OF KANSAS CITY Entrepreneurship and the Economy Kelly D. Edmiston Senior Economist Entrepreneurship on the Edges, April 26 2018EXTERNAL
  2. 2. FEDERAL RESERVE BANK OF KANSAS CITY Disclaimer 2 EXTERNAL The views expressed in this presentation are those of the speaker and not necessarily those of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
  3. 3. FEDERAL RESERVE BANK OF KANSAS CITY Historical GDP and FOMC Forecast 3 04/26/2018 Source:U.S.BureauofEconomicAnalysis/HAVERAnalytics; FederalReserveBoardofGovernors 2.6% 2.2% 1.8% 1.8% 2.7% 1.8% -0.3% -2.8% 2.5% 1.6% 2.2% 1.7% 2.6% 2.9% 1.5% 2.3% 3.0% 2.6% 2.1% 2.0% -4% -3% -2% -1% 0% 1% 2% 3% 4% -4% -3% -2% -1% 0% 1% 2% 3% 4% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 LR FOMC Projections (central tendency)
  4. 4. FEDERAL RESERVE BANK OF KANSAS CITY 2.0% 2.2% 2.4% 2.6% 2.8% 3.0% 2.0% 2.2% 2.4% 2.6% 2.8% 3.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2017 Consensus Forecasts for 2018 Source:ConsensusForecasts 4
  5. 5. FEDERAL RESERVE BANK OF KANSAS CITY Small Business Statistics • 93 percent of businesses are microbusinesses (nonemployer firms and firms with 1–4 employees) – 80 percent are nonemployer firms • 73 percent of nonemployer firms have revenue < $100,000 – 97 percent have revenues < $1 million • 31 percent of small employer firms have revenue < $100,000 – 80 percent have revenue less than $1 million 5 04/26/2018 Source: U.S. Bureau of Labor Statistics, Statistics of U.S. Businesses (2014); Emily Wavering Corcoran and Ann Marie Wiersch, 2017, “Small Business Credit Survey: Report on Microbusinesses, Nonemployer and Small Employer Firms,” Federal Reserve System, November
  6. 6. FEDERAL RESERVE BANK OF KANSAS CITY Employment by Firm Size 6 04/26/2018 Nonemployer Firms 16.4% 1-19 Employees 14.3% 20-99 Employees 13.9% 100-499 Employees 11.8% 500+ Employees 43.6% Data Source: U.S. Census Bureau, Statistics of U.S. Businesses
  7. 7. FEDERAL RESERVE BANK OF KANSAS CITY Net Job Creation by Firm Size 7 04/26/2018 2.4% 17.1% 20.7% 21.3% 20.5% 24.0% 21.7% 24.3% 23.7% 21.5% 20.8% 22.3% 20.6% 20.2% 35.1% 23.7% 21.2% 18.7% 20.8% 17.6% 18.3% 38.3% 35.5% 36.7% 39.2% 36.5% 37.8% 39.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013 2014 2015 2016 1-19 20-99 100-499 500+ 1-19 Employees 17.1% 20-99 Employees 16.6% 100-499 Employees 14.1% 500+ Employees 52.2% Data Sources: U.S. Census Bureau, Statistics of U.S. Businesses and Business Employment Dynamics
  8. 8. FEDERAL RESERVE BANK OF KANSAS CITY Life of a Start-Up 8 04/26/2018 Start-up Rapid Growth Failure
  9. 9. FEDERAL RESERVE BANK OF KANSAS CITY Job Growth from Small and Larger Firms 9 04/26/2018 -2,250 -1,510 -4,158 -13,298 2,391 1,674 4,573 13,568 Small Larger Closings Contractions Openings Expansions 434 556
  10. 10. FEDERAL RESERVE BANK OF KANSAS CITY Summary: Job Creation by Firm Size • The majority of workers are employed by large firms • Net job creation is higher in small firms • But it is because they are young firms, with many firm births and firm deaths – 44 percent of nonemployer firms and 37 percent of small employer firms (1–4 employees) are less than 5 years old 10 04/26/2018 See John Haltiwanger, Ron S. Jarmin, and Javier Miranda, 2013, “Who Creates Jobs? Small Versus Large Versus Young,” Review of Economics and Statistics, 95(2), 347–361.
  11. 11. FEDERAL RESERVE BANK OF KANSAS CITY Global Entrepreneurship Monitor • Interview data collected in national coordinated effort (100+ economies) • Two elements of entrepreneurship are covered – Entrepreneurial behavior and attitudes – National context 1104/26/2018
  12. 12. FEDERAL RESERVE BANK OF KANSAS CITY Propensity to Become Entrepreneurs • Low-income – substitution for less attractive or difficult to find wage and salary employment; less (necessity) • High-income – opportunity to receive higher earnings, improve socioeconomic status, and/or enhancing work-life balance 12 04/26/2018 Income PercentSelf-Employed/Entrepreneurs Necessity Opportunity
  13. 13. FEDERAL RESERVE BANK OF KANSAS CITY Global Entrepreneurship Monitor • Total entrepreneurial activity is high in the U.S. at 13 percent (of 18–64 in labor force) compared to 26 innovation-driven economies (IDEs) and stable • Entrepreneurial intentions are lower in the United States than the IDE average, but nascent activity levels are higher • Nascent entrepreneurial employee activity is high in the U.S. at 7 percent compared to a 5 percent IDE average 13 04/26/2018
  14. 14. FEDERAL RESERVE BANK OF KANSAS CITY Global Entrepreneurship Monitor • Opportunity motives are higher in the U.S. (88 percent of business starts) relative to the average for IDEs (78 percent) • Necessity motive at 11 percent, lower than in 2008 preceding recession (moved higher in 2009–10) • Necessity more likely to drive entrepreneurs over 45, although the rate is comparatively low • Entrepreneurial activity highest in 35–44 cohort in U.S. but 25–34 cohort in other IDEs • 55 percent of Americans (18–64 in LF) report they have the capability to start their own businesses 14 04/26/2018
  15. 15. FEDERAL RESERVE BANK OF KANSAS CITY Global Entrepreneurship Monitor 15 04/26/2018 0 2 4 6 8 10 12 14 16 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Percentage of 18-64 population who are either a nascent entrepreneur or owner- managerof a new business
  16. 16. FEDERAL RESERVE BANK OF KANSAS CITY Global Entrepreneurship Monitor 16 04/26/2018 0 10 20 30 40 50 60 70 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Percentage of 18-64 population who see good opportunities to start a firm in the area where they live
  17. 17. FEDERAL RESERVE BANK OF KANSAS CITY Global Entrepreneurship Monitor 17 04/26/2018 0 10 20 30 40 50 60 70 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Percentage of 18-64 population who believe they have the required skills and knowledge to start a business
  18. 18. FEDERAL RESERVE BANK OF KANSAS CITY Global Entrepreneurship Monitor 18 04/26/2018 0 2 4 6 8 10 12 14 16 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Percentage of 18-64 population (individuals involved in any stage of entrepreneurial activity excluded)who are latent entrepreneurs and who intend to start a business within three years
  19. 19. FEDERAL RESERVE BANK OF KANSAS CITY Global Entrepreneurship Monitor 19 04/26/2018 0 5 10 15 20 25 30 35 40 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Percentage of 18-64 population perceiving good opportunities to start a business who indicate that fear of failure would prevent them from setting up a business
  20. 20. FEDERAL RESERVE BANK OF KANSAS CITY Contact Information Kelly D. Edmiston Senior Economist Federal Reserve Bank of Kansas City 1 Memorial Drive Kansas City, MO 64198 kelly.edmiston@kc.frb.org 20 04/26/2018

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