Author: Derek Ramirez
Are entrepreneurs in decline? National trends appear to say “yes.” From academic research to popular data blogs, experts are discussing, and lamenting, the decline in new businesses. Thoughts on the causes vary, but everyone agrees that the decline is real. Does this mean North Carolina entrepreneurship has been falling as well? We can find the answer by studying the US Census Bureau Business Dynamics Statistics.
Going back to 1977, new firms represented 16.1 percent of all firms. New firms also comprised 4.8 percent of all firm employment in that year. Between 1977 and 2011 (the most current data available), the percentage of new firms in the state has declined, on average, by 0.2 of a percentage point each year. Employment has declined less than 0.01 of a percentage point each year in the same time frame. So it looks like North Carolina is losing new firms as a share of all firms, similar to the national trend.
Is the trend consistent across the state? We don’t have county-level data for firms, but Census does give Metro versus non-Metro trends for each state. A look at the data, however, revealed no difference between the two categories of counties in North Carolina. Lastly, Census publishes data by Metropolitan Statistical Area (MSA) for firms. Looking at MSA trends, overall they match the statewide data concerning the share new firms comprise of total firms. The Charlotte/Concord/Gastonia MSA has been relatively flat, while the Raleigh/Cary MSA shows a small increase since 1977. Neither MSA had a higher percentage of new firms in 2011 than in 1977.
For other MSAs, the recent recession has decreased the share of employment and total firms accounted for by new firms. Determining why Raleigh and Charlotte have managed to stay flat and defy the statewide and national trends will take more information, but it's nice to see new businesses are not in full decline in some parts of the state.