The most recent update to the Business Dynamics Statistics from the U.S. Census Bureau found young firms were disproportionally affected in recent years due to the recession, chiefly in states with notable drops in home prices.
The Business Dynamics Statistics compiles annual statistics (beginning in 1976) by business age and size. This annual report is critical to understanding existing and historical U.S. entrepreneurial activity.
Much of the growth of the U.S. economy is rooted in entrepreneurship, which is why the U.S. Bureau of Labor Statistics (BLS) collects data on new businesses and job creation.
Continue reading for highlights of the latest report, which provides some interesting insights on the impact of new and small businesses to the number of businesses and jobs in the economy.
New Business establishments are defined as establishments that are less than 1 year old. And this number tends to rise and fall with the economy. For the year ending in March 2010, the number of new establishments was lower than any other year since tracking the data.
The number of jobs created by “new business” has also decreased. This trend combined with that of fewer new establishments overall indicates that the number of new jobs in each new establishment is declining.
In other words, fewer new businesses are being started—and when they are started, the business starts with fewer employees, thus, further the decline in the number of new jobs.
Unfortunately, not all businesses stay in business. Survival rates follow a similar trajectory, regardless of the birth year; however, survival rates for establishments vary by industry.For example, the health care and social assistance industry regularly ranks among the industries with the highest survival rates over time, while construction ranks among the lowest. (See chart.)
New Business Births and Deaths
From 1993 to 2006 there was marked increase in the number of births and deaths. High numbers in both categories indicate a higher amount of business “churn”— new business establishments entered and old establishments exited the economy in greater numbers.
Business births have experienced the steepest decline since the most recent recession began in December 2007. To add to that, new businesses are not being ”born” at the same levels experienced before 2007, and the number is much lower than during the 2001 recession.
The late 1990s saw the peak in the number of jobs created from new business. Unfortunately, there has been an overall decline since then. The largest decrease in birth-related employment comes from the latest recession.
Generally, entrepreneurs enter into small businesses. Of the companies with 249 employees or fewer, there has been a decrease of private sector employment since the early 1990s.
Companies with 250 or more employees have seen their shares of total employment increase.
Approximately 75% of all U.S. business locations are non-employer businesses according to the U.S. Census Bureau. The makeup of non-employer (entrepreneur) businesses is as follows:
- 19.4 million sole proprietorships,
- 1.4 million corporations and
- 1.6 million partnerships.
With all that entrepreneurs are up against, small businesses—with or without employees—should stay up-to-date on information provided by the Business Employment Dynamics news releases. They track the numbers and crunch the numbers to give entrepreneurs useful information.