In most U.S. metro areas, more businesses are closing their doors than opening them, a worrying trend several years into the economic recovery, Governing magazine reports.
A new report from the Economic Innovation Group highlights the declining number of new startups, revealing a stark reversal from decades of growth. To make matters worse, much of the new companies are concentrated in relatively few areas.
“Most metros are actually losing ground in businesses,” John Lettieri, director for policy and strategy for the Washington-based think tank, tells Governing. “It’s a totally new phenomenon.”
In the Baton Rouge metro area, businesses opened and closed at nearly the same rate between 2010 and 2014. The area has an average business birth rate of 6.8% and an average business death rate of 6.9%.
Nationally, the EIG study found more firm closures than startups in nearly two-thirds of all metro areas between 2010 and 2014, the latest year for which data is available.
Startup rates had exceeded closure rates every year since at least the 1970s—even during recessions. That all came to a halt in 2008 with the economic downturn. While it’s normal for growth to diminish somewhat during economic recoveries, it has been slower than usual: There were still 182,000 fewer businesses in 2014 than in 2007, according to the report.
Falling startup rates aren’t just confined to a few industries. All major sectors of the economy experienced gradual declines.
The slowdown in the formation of new businesses has led to what the report calls a “golden age of incumbency,” with a larger share of Americans working for well-established companies than ever before.
