Data Spotlight: Net New Business Establishments by State

Tom Still, president of the Wisconsin Technology Council, succinctly lays out the importance of startups and entrepreneurs in a recent column: “Small businesses create most jobs in the United States, so it follows that more startup companies translate to more jobs. State strategies that promote entrepreneurism can help.”

Still cited recent data on new net business formations in Wisconsin and how the state has ranked in the US, numbers that were supplied by EMSI. In this data spotlight, we’ll use the same year-over-year business establishment data for each state (plus Washington, D.C.) from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages to pinpoint some noteworthy trends.

As Still points out, Wisconsin has been all over the map in how it has ranked in new business establishment formation, coming in seventh in the US in 2001 and dropping to 50th in 2006. Its volatile output of new establishments mirrors the performance of many states.

Washington State ranked No. 1 in 2010 with the formation of more than 8,300 new business establishments. It was third in the US in 2009 and 11th in 2008. Massachusetts, Texas, New York, and Illinois joined Washington as the largest net establishment creators. (Just to clarify, an establishment is a single physical location of some type of economic activity — in other words, a business. A single company may have multiple establishments.)

From 2009 to 2010, 29 states had net business establishment decline. Michigan had the largest drop, while California, Colorado, and Ohio, and Georgia were also in the bottom five.

California’s economic woes and instability have been well-documented, and this data makes another case for how bad things have gotten there. California had the most net new business establishments in 2009 (more than 12,500) and 2008 (32,000-plus); in fact, it ranked either first or second from 2001 to 2009. But the Golden State sank all the way to 50th in 2010 with more than 4,600 fewer new establishments than the previous year.

For each state’s performance since 2008 and where they ranked in 2010, see the following table. We’ve also included a per capita measurement for each state based on total business establishments in 2010. Washington, D.C. ranks No. 1 with more than two times as many business establishments, per capita, than the national average (1.00).

State 2008 2009 2010 2010 New Biz Est. Rank 2010 Total Biz Est. Per Capita
Washington 2,531 3,565 8,315 1 1.20
Mass. 2,379 198 6,815 2 1.16
Texas -4,469 1,962 5,658 3 0.78
New York 6,244 780 5,416 4 1.05
Illinois 8,299 5,803 4,233 5 1.02
Louisiana 3,792 1,058 3,714 6 0.98
Kentucky -3,345 -3,434 1,962 7 0.86
Oregon -2,250 -1,653 1,669 8 1.13
New Jersey 1,414 -6,243 1,571 9 1.07
Virginia 3,642 -968 1,208 10 0.99
Oklahoma 1,478 122 1,102 11 0.93
New Mexico 772 -497 781 12 0.90
District of Columbia 412 149 650 13 2.06
Pennsylvania 2,942 -1,590 469 14 0.92
Missouri 561 -2,038 449 15 0.97
North Dakota 471 120 411 16 1.33
Wisconsin 534 -3,322 267 17 0.94
Kansas 1,332 992 236 18 1.04
Nebraska 829 103 231 19 1.11
West Virginia -66 -350 124 20 0.88
South Dakota 346 214 42 21 1.24
Alaska 308 -175 1 22 0.97
Wyoming 558 16 -34 23 1.54
Iowa 434 182 -165 24 1.05
Rhode Island -343 -453 -242 25 1.16
Montana 581 -441 -341 26 1.45
Vermont 67 -341 -359 27 1.30
Hawaii 397 303 -437 28 1.00
New Hampshire 263 -731 -461 29 1.22
Arkansas 2,742 -49 -568 30 0.99
Delaware -781 -1,047 -636 31 1.11
Maryland -1,172 -1,839 -637 32 0.99
North Carolina 5,043 -5,087 -656 33 0.91
Maine 707 -985 -698 34 1.24
Connecticut 702 -1,045 -926 35 1.09
Mississippi 896 -378 -1,062 36 0.79
Idaho 256 -931 -1,162 37 1.17
Alabama 1,391 -3,780 -1,337 38 0.83
Minnesota 1,136 -3,907 -1,530 39 1.04
Tennessee 2,084 -2,324 -1,641 40 0.76
Indiana 1,705 -1,045 -1,669 41 0.84
Utah 638 -1,966 -1,904 42 0.99
Florida 16,815 -24,402 -2,194 43 1.10
South Carolina 1,356 -4,680 -3,205 44 0.82
Nevada 2,043 -1,674 -3,359 45 0.91
Arizona 2,262 -12,717 -3,419 46 0.74
Georgia 4,466 -4,800 -3,449 47 0.91
Ohio 1,557 -4,688 -3,543 48 0.84
Colorado -32 -3,681 -3,552 49 1.18
California 32,829 12,529 -4,632 50 1.24
Michigan 1,601 -5,078 -5,480 51 0.86

See our follow-up post here.

If you’d like to see this data for your state dating back even further, email Josh Wright or leave a comment below. And read more about the business establishment trend for the US here.

Illustration by Mark Beauchamp

2 Responses to “Data Spotlight: Net New Business Establishments by State”

  1. Jim Zentner

    Josh,

    I have a question and comment. What does the negative number mean? The comment is, have you done done any analysis of companies that are more than 100 employees but less than 500 or 1,000? I read an article a couple days ago about the issue of who and where are the jobs really being created. And the analysis was not with start-ups but with companies that have at least 100 employees and been around more than 5 – 10 years. Some of the statistics came from the BEA. You might want to check on how effective really are start-ups when it comes to being the real job generators in our economy.

    Jim Zentner

    • Joshua Wright

      Jim:
      The negative numbers mean that a particular state had, in net, fewer jobs from one year compared to the previous year; essentially the loss of establishments has washed out any positive establishment creation. So Minnesota in 2009 had 3,900+ fewer establishments than it had in 2008.
      Regarding your comment, we have not done analysis on the size of establishments you refer to. But I would point you to this article on the growth (or decline) of establishments between 2-4 employees and those with 5-99 employees. The effectiveness of startups in creating jobs is definitely up for debate — and we’ve seen more and more regions move to economic gardening strategies that target stage 2 companies (i.e., those past the startup phase but usually with less than 100 employees).