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Start-Ups and Blowouts

Chart showing new-business incorporations, business bankruptcies and business failures nationwide by region.
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One way to tell whether the economy is indeed recovering is to compare three indicators -- new-business incorporations, business bankruptcies, and business failures -- from year to year. The Small Business Administration's most recent data, comparing 1992 figures with those from 1991, suggest a modest upturn at best. All three indicators rose in the fiscal year ending September 1992. New-business incorporations rose by 5.6%; business bankruptcies rose by 1.7%; and business failures increased by 18.1%.

* * *

Alaska, Idaho, Oregon, and Washington:
Incorporations: +8.8%

Failures: +11.1%

Bankruptcies: -1.9%

* * *

Arizona, California, and Nevada:
Incorporations: +2.0%

Failures: +37.9%

Bankruptcies: +7.5%

* * *

Colorado, Iowa, Montana, North Dakota, South Dakota, and Utah:
Incorporations: +14.0%

Failures: -11.7%

Bankruptcies: +18.7%

* * *

Arkansas, Louisiana, New Mexico, Oklahoma, and Texas:
Incorporations: +2.4%

Failures: +4.3%

Bankruptcies: -1.6%

* * *

Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin:
Incorporations: +8.0%

Failures: +7.8%

Bankruptcies: +7.8%

* * *

Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and Tennesse:
Incorporations: +5.9%

Failures: +3.8%

Bankruptcies: -10.3%

* * *

Delaware, Maryland, Pennsylvania, Virginia, and West Virginia:
Incorporations: +4.6%

Failures: +18.5%

Bankruptcies: -10.1%

* * *

New Jersey and New York:
Incorporations: +8.5%

Failures: +47.4%

Bankruptcies: +26.5%

* * *

New England:
Incorporations: -2.6%

Failures: +27.2%

Bankruptcies: +1.4%

* * *

National:
Incorporations: +5.6%

Failures: +18.1%

Bankruptcies: +1.7%

* * *

Source: For incorporations and failures, the Dun & Bradstreet Corp.; for bankruptcies, Administrative Office of the U.S. Courts.

* * *

Bruce Phillips, acting director of the SBA's Office of Economic Research, in Washington, D.C., says that new-business incorporations are considered a leading indicator and that they suggest economic optimism (not to be confused with economic success, as success rates of new-business formations are not factored in). After peaking, in 1986, at 702,000, new-business incorporations stayed in the 640,000-to-680,000 range for five years, he says, but they've started to creep back up. In fiscal year 1992 they rose in all but one (New England) of the SBA's 10 regions.

The hottest region for start-ups is composed of Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming, and posted a 14% increase. The hottest state? Montana, whose number of new-business incorporations increased by 30% from 1991. California, unfortunately, isn't looking very golden: new incorporations increased by only 1% during 1992, while failures increased by 40% and bankruptcies by 9%.

* * *
Last updated: Sep 1, 1993




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