March 2022
The Decline in Employment Dynamism Over the Last Three Decades
Anthony Colavito
Business dynamism refers to the continuous process of firm entry, growth, contraction, and exit, and the simultaneous creation and destruction of jobs. A healthy economy is marked by low barriers to entry for new firms and a labor market that permits workers to move easily between jobs.
Historically, the United States has had high levels of business dynamism. New firms burst onto the market, offering new goods and services to consumers, attracting talented workers to develop and improve their novel products, and changing the overall economic landscape. Today, the picture is different.
In this Spotlight, we observe the pre-pandemic decline of employment dynamism—a concept referring to the levels of jobs created and destroyed—across industries, states, firm sizes, and establishment ages in the United States.