The Death of Small Business and the Destruction of Jobs
Here is the relevant sections from his more economic focused blog at Asia Times, Inner Workings:
"Structurally, a very large percentage of job losses during recessions reflect creative destruction: big companies who lay off workers in recessions downsize permanently. The jobs are not replaced at the same companies; the old jobs go away forever, and new jobs are created at the grass roots of the economy.
That’s why we have to look to small business for continued job growth, and why the prospects are grimmer than the market seems to believe.
Visually, the relationship between changes in payrolls and changes in inventories appears quite strong:
Quarter-on-Quarter Change in Inventories (GDP Basis) Vs. Payrolls (Establishment Survey)
But closer examination shows that the relationship is quite one-sided: the correlation is very high in recessions, but practically nil in recoveries.
Correlation (over 12 quarters) Between Inventory and Payroll Change vs. Payroll Change
The one-sidedness of the correlation is consistent with the fact that the vast majority of new jobs during recoveries are created by new, small businesses. The inventory cycle is largely a function of big firms. They shrink in recessions and their job losses often are permanent. The old jobs are replaced by new entrepreneurs.
Given the miserable situation of entrepreneurs, there is little reason to expect that future job growth wil be correlated with any recovery of inventories."
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