Tuesday, May 8, 2012

Business Dynamics Statistics in Herkimer and Oneida Counties: Establishment Births and Deaths

The Business Dymanics Statistics Program  (BDS) is a product of the U.S. Census Bureau and includes measures of establishment openings and closings, firm startups, job creation and destruction by firm size, age, and industrial sector, as well as several other statistics on business dynamics. The U.S. economy is comprised of over 6 million establishments with paid employees. The population of these businesses is constantly changing –– some businesses grow, others decline and yet others close altogether. New businesses arise to replenishing this pool. The BDS series provide annual statistics on gross job gains and losses for the entire economy and by industrial sector and state. Currently the BDS covers the years 1976 through 2010 These data track changes in employment at the establishment level, and thus provide a picture of the dynamics underlying aggregate net employment growth.

The Herkimer and Oneida Counties region (or what is known as the Utica-Rome Metropolitan Statistical Area, or U-R MSA) has faced incredibly difficult hurdles over the last 20 years. With the closing of several major businesses, as well as the realignment of Griffiss Air Force Base (GAFB), the economic impacts on the region have been unprecedented. Below are several pieces of data from the BDS data base, as well as the Small Business Administration’s (SBA) Office of Advocacy . The SBA Office of Advocacy offers data through its Statistics of U.S. Businesses (SUSB) program to track establishment births and deaths, as well as the associated job creation and loss with each of those respectively.

For example, looking at the chart below, you can see how establishment loss spiked in the early and mid-1990s in our region. At the same time, new businesses moving into the area also dropped precipitously just prior to the decision to close GAFB, and then for the remainder of the decade following its closure.
Since the start of the new millennium, business births and deaths appear to both be increasing slightly, but in fits and starts.
So how do establishment births and deaths impact job growth in the region ? Well below is a chart showing establishment births and deaths just for the last 5 years worth of SUSB data (2003-2007). As you can see, in all but one of the years the number of business deaths outnumbered the business births regionally.
However, in three of the last 5 years there have been more jobs created by newly created establishments than lost by those that have closed. This is especially true in 2007. So it’s not just about the number of establishments created or lost, but the size of those establishments. 

In the U-R MSA, about 22.5% of all newly formed establishments are among companies of 20 or more employees; establishments of this size (20 or more employees) only make up about 19.7% of all business “deaths”. So the region is seeing slightly more midsize to large companies creating jobs in new establishments than they are losing.