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BUSINESS DYNAMICS STATISTICS BRIEFING:
 Jobs Created from BusinessStartups in the United States
 January 2009
Second in a series of reports using data from theU.S. Census Bureau’s Business Dynamics Statistics
 John HaltiwangerUniversity of MarylandRon JarminU.S. Bureau of the Census Javier MirandaU.S. Bureau of the Census
 
Business Dynamics Statistics Briefing: Jobs Created from Business Startups in the United States©2008 by the Ewing Marion Kauffman Foundation. All rights reserved.
 About the Business Dynamics Statistics
The Business Dynamics Statistics (BDS) is a product of the U.S. Census Bureau thatmeasures business openings and closings, startups, job creation and job destruction by firmsize, age, industrial sector, and state. The U.S. economy is comprised of more than 6 millionestablishments with paid employees. The population of these businesses is constantlychurning-some businesses grow, others decline, and yet others close. New businessesconstantly replenish this pool. The BDS monitors this activity to provide a picture of thedynamics underlying aggregate net employment growth. More information about the BDS canbe found at http://www.ces.census.gov/index.php/bds/bds_home
 
Business Dynamics Statistics Briefing: Jobs Created from Business Startups in the United States
[1]
Newly released data from the U.S. CensusBureau—the Business Dynamics Statistics
1
—allowunprecedented tracking of business dynamics for U.S.firms and establishments. This is one of several BDSbriefings to be released highlighting key features ofthis new data.One novel feature of the BDS is that businessstartups (new firms) can be tracked on acomprehensive basis for U.S. private, non-agriculturalbusinesses. The fraction of employment accountedfor by U.S. private-sector business startups over the1980-2005 period is about 3 percent per year. Thismeasure is interpretable as the employment-weightedbusiness startup rate for the United States. While thisis a small fraction of overall employment, all of thisemployment from startups reflects new jobs. As such,3 percent is large compared to the average annualnet employment growth of the U.S. private sector forthe same period (about 1.8 percent). This patternimplies that, excluding the jobs from new firms, theU.S. net employment growth rate is negative onaverage. This simple comparison highlights theimportance of business startups to job creation in theUnited States.The adjacent chart shows the fraction of jobsdue to business startups for all firms and for selectedfirm-size classes: micro firms, and midsize to largefirms. For micro firms (firms with one to fouremployees), the percent of jobs in any given yearaccounted for by business startups is very large—about 20 percent on average. For substantiallylarger firms (firms with 250 to 499 employees),the percent of jobs in any given year accountedfor by business startups is considerably smaller—about 1.3 percent of employment in this firm-sizeclass.
2
This is still substantial relative to netemployment growth for the size class.This chart also shows that business startupstend to be mildly procyclical. That is, in mostbusiness cycle downturns (shown in shaded areas),business startups decline slightly (2001 is anexception). However, it is striking that businessstartups remain robust even in the most severerecession over the sample period (in the early1980s). The procyclicality is more apparent formicro-firm business startups. The robustness ofbusiness startups to cyclical contractions is of clearinterest given the current downturn. It remains tobe seen whether the current downturn may have amore adverse impact on business startups than inpast recessions.The overall business startup rate does not exhibitmuch of a trend, but Figure 1 shows a decliningtrend in the business startup rate for micro firms.While understanding the latter requires detailedanalysis (for which the BDS is well suited), this mayreflect compositional changes in sectors such as retailtrade, where there is ample evidence of substantialshifts away from small, single-establishment firms tolarge, national firms.This briefing highlights only one dimension ofthe Census Bureau’s new Business DynamicsStatistics. The Business Dynamics Statistics includesmeasures of business startups, establishmentopenings and closings, and establishmentexpansions and contractions in terms of both thenumber of establishments and the number of jobs.The BDS data provide these new statistics on anannual basis for 1977-2005, with classifications forthe total U.S. private sector by broad industrialsector, firm size, firm age, and state. Furtherinformation about the BDS can be found athttp://www.ces.census.gov/index.php/ bds/bds_home.
Percen
t
of Job
s
Accoun
t
e
d
for by New Firm
s
(All an
d
 
S
elec
t
e
d
 
S
ize Cla
ss
e
s
)
1980
     -            5            0            5            1            0            0            1            5            2            0            2            5
1985 1990 1995 2000 2005
YEAR
 All
St
ar
t
u
ps
Micro
St
ar
t
u
ps
(1–4 Em
p
loyee
s
) (Righ
t
 
S
cale)Large
St
ar
t
u
ps
(250–499 Em
p
loyee
s
)
1. The BDS was developed at the Census Bureau’s Center for Economic Studies with support from the Census Bureau and the Ewing Marion Kauffman Foundation.2. Large firms account for a relatively large share of overall employment, so we caution the reader that a 1.3 percent contribution of startups in the largest size class can account fora considerable share of employment of all startups.
 Jobs Created from Business Startups in the United States
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