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New Business Growth Is Sputtering

The number of companies created in the U.S. has increased at a much slower rate in recent years, according to a new report.
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The pace of new business creation has been slow since the end of the recession, a new report finds.

The number of new private sector business establishments in the U.S. grew by only about 132,000, or 1.5 percent, from 2010 through 2012, the first three full years of the economic recovery. The report, from CareerBuilder and Economic Modeling Specialists, analyzed data from the Bureau of Labor Statistics' Quarterly Census of Employment and Wages.

By comparison, during the first three years before the recession, the number of new business establishments increased by 7.2 percent. The report defines a "business establishment" as a single physical location that produces some form of economic activity. One company can have multiple establishments, like Starbucks or other chains. 

Mark Zandi, chief economist at economic research firm Moody's Analytics, tells USA Today that entrepreneurs helped add around 3 million jobs in 2012, which was just above the rate of job creation during the recession. In 2007, Zandi says, startups created 3.6 million jobs.

E.J. Reedy, research and policy director at the Kauffman Foundation, which studies entrepreneurship, tells USA Today that entrepreneurs have been hamstrung by a few big blows, especially the decline in value of homes and other assets, and banks tightening their standards on loans.

Some states, however, are showing stronger growth in entrepreneurship, the report finds. Texas had almost 30,000 more establishments in 2012 than in 2009--a 5 percent gain--and accounted for 22 percent of all new establishments in the U.S. New York had 21,000 new establishments created in 2012 compared with 2009, a 4 percent increase.

The biggest decline was in Michigan, which had a 6 percent decrease in the number of new businesses between 2009 and 2012, the report found.

Last updated: Feb 3, 2014

WILL YAKOWICZ | Staff Writer | Reporter, Inc.com

Will Yakowicz is a staff writer for Inc. magazine. He has covered business, crime, and local politics for The Brooklyn Paper and was the editor of Park Slope Patch. He has also reported in the West Bank and Moscow for Tablet Magazine. He lives in Brooklyn, New York.




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