The nation's business startup rate fell below 8 percent for the first time in 2010, marking the lowest point on record for new firm births and continuing a long term trend, new data from the U.S. Census indicates.
New firms as a percentage of all firms continued its downward slide over the last 30 years, going from a high of 13 percent in the 1980s to just under 11 percent in 2006 before making a steep dive to below 8 percent in 2010, the most current year of available data.
This and other findings based on newly released data on U.S. firms and establishments with paid employees is included in the Census Bureau's Business Dynamics Statistics briefing released today.
Reduced numbers of new firms negatively affect the U.S. economy which relies on new startups as contributors to job creation. From March 2009 to March 2010, U.S. private sector firms lost 1.8 million jobs. However, the 394,000 companies that began operations in 2010 created 2.3 million jobs at a time when the economy was anemic.
"Without the new jobs created by business startups, the Great Recession would have been even deeper, with many more jobs lost," said Robert E. Litan, vice president of research and policy at the Ewing Marion Kauffman Foundation, which partially funded the report. "Unfortunately, new firm formation has waned since the 1980s, and the recession accelerated the decline. If we are to achieve and sustain a hearty recovery, policymakers, educators and organizations that help entrepreneurs commercialize their technologies must be willing to address every obstacle that stands in the way of new business formation."
Today's press release announcing the findings can be read here.