California’s once-mighty new business creation fell flat last year. Florida saw an even bigger drop the last two years. Washington’s business climate is (apparently) thriving. And a whole lot of states are doing only so-so. Those were the big takeaways from EMSI’s post last week detailing year-to-year new business formations by state.
The data from the BLS for California was so striking that the Los Angeles Times (here, here and here), the San Francisco Chronicle, and Orange County Register highlighted EMSI’s numbers in various blogs, articles, and op-eds.
As a follow-up, we examined the same business establishment data — establishment totals, not new formations — and came up with the per capita concentration for each state (plus Washington, D.C.) since the beginning of 2008, roughly the start of the recession. This is perhaps a better way to look at new business creation over time because it factors in EMSI population estimates.
For these numbers, we’re looking at concentration in terms of location quotient. The average concentration of the nation would be represented as 1.0. Anything above this number is more concentrated, anything below is less.
Washington, D.C., as of 2010, had more than twice the concentration of business establishments and Wyoming had 50% more establishments, per capita, than the nation.
D.C., Washington state (see more below), and Massachusetts made the biggest jumps in concentration since the start the recession, followed by North Dakota, Louisiana, and Illinois.
The biggest drops came in Nevada and Arizona. Nevada was below the national average in terms of business establishment concentration in 2010, and Arizona has remained well below (25%). Tennessee and Texas — which stayed stagnant from 2008-10 — were just behind Arizona as the least-concentrated states last year.
|PER CAPITA TOTAL BUSINESS ESTABLISHMENTS|
|State||2008||2009||2010||2008-10 per capita change|
|District of Columbia (DC)||1.97||1.98||2.05||0.08|
|North Dakota (ND)||1.26||1.28||1.32||0.06|
|New York (NY)||1.01||1.03||1.05||0.03|
|South Dakota (SD)||1.21||1.23||1.24||0.03|
|West Virginia (WV)||0.85||0.86||0.87||0.02|
|New Mexico (NM)||0.89||0.88||0.90||0.01|
|Rhode Island (RI)||1.15||1.16||1.16||0.01|
|New Jersey (NJ)||1.06||1.05||1.06||0.00|
|New Hampshire (NH)||1.23||1.23||1.22||-0.01|
|North Carolina (NC)||0.93||0.92||0.91||-0.02|
|South Carolina (SC)||0.88||0.85||0.83||-0.05|
One of interesting things to note about these bottom-ranked states: Utah, Nevada, and Arizona had three of the four fastest-growing populations from 2008 to 2010. So their low rankings are likely the result of population growth outpacing business establishment growth (furthermore, when you look at the raw numbers, each state is in the bottom in terms of net new business formations).
We also looked at the broad industry sectors driving the growth or decline of establishment levels in Washington state, California, and Florida. Washington led the nation in new business formation in 2010, but that growth is dominated by “other services (except public administration)” — which is largely made of low-paying private household jobs (maids and housekeepers, child care workers, person and home care aides, etc.).
|WASHINGTON BUSINESS ESTABLISHMENT CHANGE|
|Agriculture, Forestry, Fishing and Hunting||7,627||7,507||7,379||(128)|
|Transportation and Warehousing||4,470||4,432||4,339||(93)|
|Finance and Insurance||9,565||9,282||8,988||(294)|
|Real Estate and Rental and Leasing||8,206||8,052||7,913||(139)|
|Professional, Scientific, and Technical Services||18,340||18,869||19,168||299|
|Management of Companies and Enterprises||688||676||661||(15)|
|Administrative and Support and Waste Management and Remediation Services||9,918||9,921||9,926||5|
|Health Care and Social Assistance||15,744||16,139||16,457||318|
|Arts, Entertainment, and Recreation||2,544||2,550||2,563||13|
|Accommodation and Food Services||15,108||15,295||15,436||141|
|Other Services (except Public Administration)||51,343||55,802||65,946||10,144|
California, meanwhile, saw most of its business establishment losses in construction. Finance & insurance, real estate, manufacturing, and professional, scientific & technical services also had substantial declines.
Florida’s business establishment drop-off from 2008 to 2010 was particularly stunning. No state in the last decade had a bigger one-year drop from 2008 to 2009, when it lost more than 24,000 net establishments and ranked last in the US — and the losses continued through 2010. Construction and finance & insurance also figure prominently in Florida’s decline.
Illustration by Mark Beauchamp.