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).
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Illustration by Mark Beauchamp