New businesses slow to return to pre-recession levels

New businesses slow to return to pre-recession levels

The number of new businesses created in the United States every year continues to lag behind pre-recession levels, new government data shows, slowing job growth even years after the depth of the Great Recession.

About 414,000 new businesses were created in 2015, according to new Census Bureau figures. That figure is higher than in the years immediately after the recession, when new business starts bottomed out at about 385,000.

But it is still more than 20 percent below the pre-recession highs experienced in 2005 and 2006.

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The figure is important because new businesses and young businesses create a disproportionate amount of new jobs around the country. While older firms streamline and slim down over time, newer businesses are most likely to grow and expand.

“The vast majority of net job creation in the economy comes from new businesses, not from existing businesses,” said John Lettieri, senior director for policy and strategy at the Economic Innovation Group. “If you don’t have new business creation, then you can’t get the new jobs that go with it.”

New businesses created 2.5 million jobs in 2015. Nationally, all businesses created a net gain of 3.1 million jobs. New businesses, which account for just 8 percent of all firms in the United States, accounted for 80 percent of the net job gain that year.

Still, those figures are below pre-recession levels. In 2006, new businesses accounted for 3.5 million jobs.

New business growth has happened fastest in Western states and along the South's Atlantic coast. Washington, California, Montana, Nevada, Utah, Colorado, New Mexico, Florida, Georgia, South Carolina and North Carolina all experienced net job creation rates of more than 3.4 percent.

The only state outside those two regions that experienced a similarly rapid job creation rate was Michigan.

West Virginia and Wyoming, two energy-producing states that have suffered as global commodity prices have slumped, experienced more job losses than gains in 2015, the report found.

Urban areas added jobs at a pace more than twice as fast as non-metropolitan areas, the Census Bureau reported. An analysis by the Brookings Institution’s Metropolitan Policy Program found the fastest job growth happening in large cities with a heavy tech presence, like Seattle; San Jose, Calif.; Austin, Texas; and Houston.

At the same time, the global commodity price bust has hurt both energy producing and agricultural states. A stronger dollar, too, puts pressure on export-heavy industries and economies.

“The better the American economy does, the worse it is for rural America,” said Mark Muro, policy director at the Metropolitan Policy Program.