Think big? Study shows areas with larger companies have faster net job growth.

• Author: Barkey, Patrick M.
• Position: Indiana Indicators

It's a sad story, being played out in cities and towns across the country, including Indiana. The factory. or business is shutting down and its workers are out of work. The television cameras catch the gates being closed as the last shift ends.

What we witness in these news stories is a snapshot of what economists call the "gross flow" of employment. Every week, every month and every quarter, people lose their jobs, while, at the same time, new jobs are created to hire others. The net effect of these two streams produces net job growth, which for states and metropolitan areas is measured and published every month.

The information revolution in government record-keeping has let us begin to actually measure these gross flows of job creation and job destruction, in addition to just recording the net result. What emerges is a fascinating and challenging picture of how businesses grow and die, and how the whole process of job growth takes place. It's quite a bit messier than many of us used to think.

A recent Bureau of Labor Statistics study on job markets in the major cities of Michigan, Ohio and Pennsylvania looked at these employment flows over the last 12 years, and came to some conclusions that may surprise you. In almost every city, the process of job growth looks a little like the race between the tortoise and the hare. New job creation is surprisingly stable, even as the economy races ahead or stalls. On the other hand, job destruction is much less predictable, and more severe.

Not surprisingly, the companies that are most likely to lay off workers are smaller, younger and pay lower wages. But if you look at the metropolitan areas that led the pack in terms of net job growth, they tended to have younger business establishments, on average, than those that lagged behind.

It sounds a little confusing, until you hear a finding that is perhaps...