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2011): “Why Small Businesses Were Hit Harder by the Recent Recession,” Federal Reserve Bank of New York, Current Issues in Economics and Finance

By Ayşegül Şahin, Sagiri Kitao, Anna Cororaton and Sergiu Laiu


Although both large and small businesses felt the sting of job losses during the 2007-09 downturn, small firms experienced disproportionate declines. A study of the recession’s employment effect on small firms suggests that poor sales and economic uncertainty were the main reasons for their weak performance and sluggish recovery—problems that affected large firms too, but to a lesser degree. Although a tightened credit supply constrained some small firms, weak consumer demand for the firms ’ products and services was a more pressing factor, reducing revenues and dampening new investment spending. The recent economic downturn saw an unprecedented deterioration in labor market conditions. From the December 2007 start of the recession to December 2009, 1 nonfarm payroll employment—the traditional measure of U.S. jobs— declined by 8.4 million, a drop in levels unmatched in the entire postwar period. A closer look at the employment figures reveals that the recession’s effect has no

Year: 2013
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