Why Start-ups Could Make or Break the Job Recovery

Start-up activity is at a record low—bad news if start-ups are indeed responsible for all net new jobs.

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[See why start-ups aren't hiring.]

The National Federation of Independent Business reported last week that small business confidence fell in June. The NFIB said that 70 percent of the decline was attributable to deterioration in the outlook for business conditions and sales. "Owners do not trust the economic policies in place or proposed, and they are distressed by global and national developments that make the future more uncertain," said William Dunkelberg, NFIB's chief economist.

There's no question that small businesses are finding this a difficult climate for success. Despite efforts to get banks to begin lending again, loans to businesses with fewer than 500 employees fell in the first quarter of this year. Federal Reserve Chairman Ben Bernanke last Monday encouraged lenders to get money into the hands of creditworthy small businesses. Bernanke said the drop in lending has been driven by three factors: weaker demand for loans, deterioration in businesses' finances, and lack of access to credit.