Small businesses are driving job growth: Yellen

Yellen says the Fed has tried to foster the conditions for job creation by keeping interest rates near historic lows

May 16, 2014 7:47 IST | India Infoline News Service
Federal Reserve Chair Janet Yellen said that the US small businesses have accounted for more than half the job gains during the nearly five-year-old economic recovery.

The economy has regained 8.6 million jobs since early 2010, leaving it about 100,000 jobs short of the 138.4 million that existed in January 2008 near the start of the recession. More than half those jobs came from companies with fewer than 250 employees, Yellen tells small business owners in a speech at the US Chamber of Commerce in Washington DC on Thursday.

Yellen says the Fed has tried to foster the conditions for job creation by keeping interest rates near historic lows, but that "overwhelmingly, it is businesses that create jobs."

By contrast, governments have shed 2.6% of their workers since early 2010.

Below are the excerpts of Janet Yellen's speech:
After the onset of the crisis, the Federal Reserve took extraordinary steps to stabilize the financial system and halt the plunge in economic activity. Since then, the Fed has continued to use its monetary policy tools to promote the recovery and make progress toward our mandated objectives of maximum employment and price stability. By putting downward pressure on interest rates, the Fed is trying to make financial conditions more accommodative--supporting asset values and lower borrowing costs for households and businesses and thus encouraging the spending that spurs job creation and a stronger recovery.

The Federal Reserve tries to promote the conditions to foster job creation, but, overwhelmingly, it is businesses that create the jobs. About 85 percent of nonfarm employment is in the private sector, which traditionally is the source of a similarly large share of new jobs during economic expansions. So far during this expansion, public-sector employment has declined and the private sector has accounted for all of the net increase in employment, so businesses have been even more crucial to job creation than usual.

Small businesses, of course, are responsible for a large share of these new jobs. According to the latest data from the Labor Department, a little more than half of the net number of jobs created since employment began growing in 2010 has been generated by firms with fewer than 250 employees, and most of that amount was accounted for by firms with fewer than 50 employees.

America has come a long way since the dark days of the financial crisis, and small businesses deserve a considerable share of the credit for the investment and hiring that have brought that progress. Although we have come far, it is also true that we have further to go to achieve a healthy economy, and I am certain that small businesses will continue to play a critical role in reaching that objective.

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