Why the Recovery Eludes Small Business
Rather than limit the fix to stoking consumer demand, policymakers need to boost credit and find new ways to help troubled industries
By Scott Shane
The Federal Reserve Bank of New York recently released a study to explain why employment at small businesses dropped so much more than employment at large companies during the Great Recession. The upshot of the Fed’s analysis: Small employers cut staff so severely because of a drop in consumer demand. I disagree that was the only reason. I think two factors—reduced access to credit and the concentration of small businesses in the worst hit sectors of the economy—play a bigger role than the Fed researchers acknowledge.
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