The States Leading the Way in Net New Business Establishments Since the Recession

Retail iconEconomist Tyler Cowen wrote in Time Magazine last year that Texas, more than any other state, “looks like the future” of America because of its population and jobs boom, cheap land, limited government regulation, and low taxes. But it’s not just on the jobs and migration front that Texas has eclipsed every other state. The Lone Star State has also created the most net business establishments — nearly a quarter of the net national total — since the end of the recession.

As we documented in a new analysis with CareerBuilder, Texas created 22% of the nation’s net private-sector business establishments from 2009 to 2012 (more than 29,000). New York created 16% of all net establishments (nearly 21,000) and Illinois created 14% (18,000-plus). That’s more than half of all net establishments since the end of the recession in three states.

On a per-capita basis, however, Texas ranked just ninth in the nation, well behind North Dakota, Nebraska, and the Pacific Northwest duo of Washington and Oregon.

BizEstab_States_2009-2012

Texas, New York, and Illinois each have major metropolitan areas that are centers of economic activity for their states and the nation. But they have other things in common, too: Their economies are diversified (it’s not just one or two industry sectors that are creating the bulk of the new business establishments), and the construction sectors in each state, while not doing great, have fared better than most areas of the country.

Michigan, on the other hand, has nearly 14,000 fewer net establishments that it did in 2009. A 16% decline in construction establishments is a big reason why, as is a 9% dip in finance and insurance establishments. Other states at the bottom of our 2009-2012 ranking have suffered in part because of construction woes, too: Idaho has seen a 22% decline in net construction establishments, while Colorado (-17%), California (-13%), New Jersey (-12%), and Kansas (-9%) have struggled as well.

In addition to big states, there are a few small-state surprises near the top of the heap, most notably Nebraska. It created more than 7,000 net establishments from 2009 to 2012, a 13% gain (second-highest behind North Dakota’s 16% growth). The biggest establishment jumps in Nebraska have been in sectors that are crucial to the state’s economy: management of companies and enterprises (23% growth), agriculture (16%), health care (8%), and professional, scientific, and technical services (6%).

Per-Capita Numbers

On a per-capita basis, Nebraska created the second-most net new establishments from 2009 to 2012 — 38 per 10,000 residents. The only state higher was North Dakota (53.4), which shouldn’t come as a surprise given its tiny population (689,000 as of 2012) and impressive oil boom. The number of mining, oil and gas extraction establishments in North Dakota rose 137% from 2009 to 2012, and transportation and warehousing — certainly playing off the energy boom — rose 82%.

As we mentioned above, Texas created the ninth-most net establishments per 10,000 residents (11.1), just ahead of New York (10.7) and just below Virginia (11.2). Other states that performed well on a per-capita basis: Washington (17.0, fourth-highest), Oregon (15.9, fifth-highest), and Massachusetts (15.0, sixth-highest).

The national average was 4.2 net new establishments per 10,000 people.

PerCapEstablishments

Note on Data and National Trends

EMSI’s business establishment data comes from the Bureau of Labor Statistics’ Quarterly Census of Employments and Wages (QCEW). The most recent year of this data is 2012, the last year of our analysis. An establishment is defined as a single physical location that produces some form of economic activity. One company can have multiple establishments (e.g., each coffee shop in a large metro area is considered a single establishment, even if it is part of a chain of coffee shops).

Business establishment data is different than numbers on business starts and closures. A firm can close an establishment and still have a presence in a metro area or state at other locations, or an existing business could expand its number of establishments by opening a new location. Still, business establishment data provides a window into the health of the business landscape from state to state — and it tracks closely with the economy and labor market overall, as CareerBuilder CEO Matt Ferguson noted in the release of this data.

As the following chart shows, the U.S. created between 115,000 to 210,000 net establishments each year from 2001 to 2007. But establishment formation plummeted during the recession, bottoming out at a loss of 80,000 net establishments from 2008 to 2009. It hasn’t approached 100,000 in any single year since.

BizEstabl_US_2000-2012

State Trends

The following table shows 2009-2012 net business establishment formation for every state and Washington, D.C. It also gives total 2012 establishments.

Some states in the lower part of the ranking have done better (or worse) of late. For instance, Arizona ranked 40th in net establishments from 2009 to 2012, but it added 3,300 establishments from 2011 to 2012 — a 2% gain. California, on the other hand, had easily the biggest drop in year-over-year establishments from 2011 to 2012, a loss of nearly 40,000 establishments. From 2010 to 2011, however, California led all states by adding 43,000 establishments. On net, the Golden State had 2,500 fewer total establishments in 2012 than 2009, which put them at 45th in the nation.

Note: As is the case with California and others, states with negative business formation had a lower number of total establishments in 2012 than in 2009.

Net Business Establishment Formations (2009-2012) 2009-2012 Rank Net New Establishments Per 10,000 Residents Total 2012 Establishments % Change (2009-2012)
Source: EMSI (via BLS, QCEW); private sector only
Texas 29,065 1 11.1 579,166 5%
New York 20,974 2 10.7 591,448 4%
Illinois 18,226 3 14.1 383,103 5%
Florida 13,309 4 6.9 601,598 2%
Washington 11,736 5 17.0 231,238 5%
Pennsylvania 10,489 6 8.2 336,510 3%
Massachusetts 9,942 7 15.0 216,820 5%
Virginia 9,132 8 11.2 231,048 4%
Nebraska 7,058 9 38.0 62,873 13%
North Carolina 6,351 10 6.5 250,647 3%
Oregon 6,238 11 15.9 127,722 5%
Missouri 3,922 12 6.5 167,435 2%
Wisconsin 3,733 13 6.5 153,039 3%
North Dakota 3,685 14 53.4 27,198 16%
Minnesota 3,387 15 6.3 159,955 2%
Kentucky 3,286 16 7.5 105,231 3%
Oklahoma 3,274 17 8.5 98,734 3%
Maryland 3,122 18 5.3 163,874 2%
Louisiana 2,315 19 5.0 121,679 2%
District of Columbia 1,885 20 30.2 35,608 6%
New Mexico 1,368 21 6.5 51,676 3%
West Virginia 1,133 22 6.1 45,553 3%
Iowa 883 23 2.9 89,146 1%
Indiana 641 24 1.0 154,603 0%
South Dakota 589 25 7.1 28,966 2%
Alaska 580 26 7.9 19,791 3%
Wyoming 414 27 7.2 23,917 2%
Tennessee 240 28 0.4 137,501 0.20%
New Hampshire 233 29 1.8 46,450 1%
Utah 116 30 0.4 81,710 0%
Montana -20 31 -0.2 40,260 0%
Rhode Island -77 32 -0.7 34,552 -0.20%
Vermont -171 33 -2.7 22,823 -1%
Maine -221 34 -1.7 46,540 0%
Arkansas -568 35 -1.9 80,779 -1%
Connecticut -595 36 -1.7 107,737 -1%
Georgia -604 37 -0.6 260,493 -0.20%
Hawaii -818 38 -5.9 36,286 -2%
Delaware -1,337 39 -14.6 27,226 -5%
Arizona -1,345 40 -2.0 144,693 -1%
Mississippi -1,417 41 -4.7 64,783 -2%
Ohio -1,452 42 -1.3 272,995 -1%
South Carolina -1,635 43 -3.4 108,351 -1%
Alabama -1,732 44 -3.6 109,537 -2%
California -2,530 45 -0.7 1,303,474 -0.20%
Kansas -2,692 46 -9.3 79,284 -3%
Nevada -2,718 47 -9.8 71,520 -4%
Colorado -2,761 48 -5.3 168,968 -2%
Idaho -2,784 49 -17.3 50,255 -5%
New Jersey -5,522 50 -6.2 254,384 -2%
Michigan -13,938 51 -14.2 232,331 -6%
United States 132,385 4.2 8,841,500 2%

Data shown in this post comes from EMSI, a CareerBuilder company. Analyst, EMSI’s data research tool, provides current-year establishments by industry, and EMSI has historical establishments available upon request to clients. For questions or data for your region, contact Josh Wright (jwright@economicmodeling.com). Follow EMSI on Twitter @DesktopEcon.

4 Responses to “The States Leading the Way in Net New Business Establishments Since the Recession”

  1. Norris Krueger

    Josh – what if you calculated on per capita basis?

    • Joshua Wright

      Good question, Norris. I wondered that myself, and updated the post after looking. The bottom of the ranking (Michigan, Idaho, New Jersey, Nevada, etc.) is still very similar, but North Dakota and Nebraska shoot to the top, which isn’t surprising.

      -Josh