July 23, 2014

Business Reference: Number of New Firms Continues to Slide, According to New Census Bureau Data

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From the Kauffman Foundation:

Building on a long-term trend, the nation’s business startup rate fell below 8 percent for the first time in 2010, marking the lowest point on record for new firm births. New firms as a percentage of all firms continued a steady downward trend in 2010 – going from a high of 13 percent (as a percentage of all firms) in the 1980s to just under 11 percent in 2006 before making a steep decline to the 8 percent in 2010 – the most current year of data available.

This and other findings based on newly released data on U.S. firms and establishments with paid employees is included in the Census Bureau’s Business Dynamics Statistics (BDS) briefing, released today. Partially funded by the Ewing Marion Kauffman Foundation, the BDS provides annual business data from 1976 to 2010.

Reduced numbers of new firms negatively affect the U.S. economy, which relies on startups as critical contributors to job creation. From March 2009 to March 2010, U.S. private-sector firms created a net -1.8 million jobs. The 394,000 companies that began operations in 2010, however, created 2.3 million jobs, in spite of the anemic economy.

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Young firms – those five years old or younger – now comprise fewer than 35 percent of all firms, down from nearly 50 percent in the early 1980s. This decrease is accompanied by a decline in the share of employment accounted for by entrepreneurial firms from 20 percent in the 1980s to 12 percent in 2010. The share of job creation also has fallen, from more than 40 percent in the 1980s to about 30 percent in recent years.

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Gary Price About Gary Price

Gary Price (gprice@mediasourceinc.com) is a librarian, writer, consultant, and frequent conference speaker based in the Washington D.C. metro area. Before launching INFOdocket, Price and Shirl Kennedy were the founders and senior editors at ResourceShelf and DocuTicker for 10 years. From 2006-2009 he was Director of Online Information Services at Ask.com, and is currently a contributing editor at Search Engine Land.