MNI INTERVIEW: US Business Creation Seen Shielded From SVB
Business applications help explain surge in job openings, former Census chief economist says.
U.S. business creation and job growth will likely continue the boom that began following the pandemic even with a potential credit squeeze after the fall of Silicon Valley Bank, former Census Bureau chief economist John Haltiwanger told MNI.
"Startups will not be impacted much by the issues stemming from Silicon Valley Bank, but a broader U.S. economic slowdown due to the Fed's monetary tightening or otherwise would very much harm startups," he said. He also acknowledged it’s reasonable to expect headwinds to credit creation at smaller banks.
Haltiwanger has presented his work at Jackson Hole and according to a recent paper with Fed Board economist Ryan Decker, more than 95% percent of counties saw a higher pace of applications during 2020-2021 than during 2010-2019.
That's a rebound from a long-term decline before the pandemic, helping create a million jobs each quarter starting in the second half of 2021, he said.
The hot labor market and wage inflation has been a key factor in the Federal Reserve's rate hikes, potentially hiking again next week even amid heightened financial risk. (See: MNI INTERVIEW: Fed Pause Would Undermine Credibility - Plosser)
Growth in business applications since 2020 has been widespread across the U.S. in virtually every urban area, with a focus on professional scientific and technical services in the high tech intensive sector, he said.
Even according to the most recent data for February, applications remain at higher levels suggesting continued higher quits rates that would point to job growth, he said, also still cautiously optimistic about future productivity trends. "We aren't seeing even through February 2023 a decline yet in business applications."
Other economists have pointed to the work by Haltiwanger and Decker to suggest that the conversion rate of applications into establishments was more than 90% and the time between applications to hiring has declined from about two years before the pandemic to a few months. Other analysis by KPMG suggests that high-propensity business applications explain more than half of the excess rise in U.S. job openings.