Private equity-backed companies continue to be a significant force in job creation, even as they face a challenging economic landscape. According to recent findings from the ESG Data Convergence Initiative (EDCI), these companies created four net new hires per 100 full-time employees this year, a decrease from nine last year. This performance still surpasses that of publicly owned companies, which managed only one net new hire for every 100 full-time staff.
Key Takeaways
Private equity-backed companies created four net new hires per 100 full-time employees this year.
This is a decline from nine net new hires per 100 FTEs last year.
Publicly owned companies created only one net new hire for every 100 full-time employees.
The slowdown in job creation is attributed to higher interest rates and a focus on digitization.
Job Creation Trends
The data, analyzed by Boston Consulting Group (BCG) for the EDCI, indicates that while the rate of job creation has slowed, private equity firms still outperform their public counterparts. The report highlights that the current economic environment, characterized by higher interest rates and slower growth, has impacted hiring rates across the board.
Despite these challenges, private equity firms are still creating jobs at a higher rate than public companies. This trend dispels the myth that private companies are slower to create new jobs compared to public ones.
Factors Influencing Job Creation
Several factors contribute to the current job creation landscape:
Macroeconomic Conditions: The ongoing economic challenges have led to a more cautious approach to hiring.
Interest Rates: Higher interest rates have made borrowing more expensive, affecting business expansion plans.
Digitization and Automation: Companies are increasingly focusing on technology, which can lead to fewer new hires as processes become more efficient.
Gender Diversity in Private Equity
In addition to job creation, the EDCI data sheds light on gender diversity within private equity-backed companies. While these companies outperform public firms in terms of gender diversity at the C-suite level, they lag behind at the board level:
C-Suite Representation: 77% of private equity-backed companies have at least one woman in the C-suite, compared to 64% in public companies.
Board Representation: Only 61% of private equity-backed companies have at least one woman on their board, while 89% of public companies do.
The Impact of Private Equity Ownership
The EDCI findings suggest that the private equity ownership model can lead to improvements in environmental, social, and governance (ESG) metrics over time. Companies in their first two years of private equity ownership report lower levels of gender diversity compared to those in their third year or beyond. Similar trends are observed in renewable energy usage and work-related injury rates, indicating that private equity can drive positive change in various areas.
Conclusion
Despite a slowdown in job creation, private equity-backed companies remain a vital source of employment growth. Their ability to create jobs at a higher rate than public companies, coupled with ongoing improvements in gender diversity and ESG metrics, underscores the resilience and adaptability of the private equity sector in challenging economic times.
Sources
Private equity-owned companies still set the pace for job creation, New Private Markets.