This article originally appeared on Owning My Own on June 30, 2016.
Did you open a small business in the years following the Great Recession? The answer, according to a new economic report, has a lot to do with where you live. And in an unprecedented number of U.S. counties, that answer was probably no.
The report, from the Economic Innovation Group, a bipartisan think tank comprised of entrepreneurs, economists and investors, finds that, nationwide, far fewer small businesses hung their shingles in the current economic recovery than during five-year periods following the previous two economic downturns (the early 2000s and the early 1990s).
From 2010-2014 – the first five years of the Great Recession’s economic recovery – there was a 166,500 net increase in the number of American businesses. That’s less than half the net increase in businesses (421,000) during the 1992-1996 recovery or the slightly smaller increase (400,500) in the 2002-2006 recovery.
The report’s authors emphasize, “The fall-off in new business establishments was directly due to a lack of startups rather than a spike in closures.”
And the businesses that did start up were disproportionately located in just a few big American cities. Like, really disproportionately.
From 2010-2014, half of all the net business growth in the entire nation took place in just 20 counties. Or as the report calls them, “super-performing counties.”
What’s unique about these 20? The report’s authors explain:
These counties contained many of the nation’s largest cities and were clustered around its largest metropolitan areas; the country’s 10 most populous counties were all represented on the list. Other leaders in Texas and the Bay Area punched well above their weight thanks to rapidly growing economies. Major urban counties as well as those in South Florida tend to be home to large foreign-born and immigrant populations too — groups that are disproportionately likely to start new businesses. Nevertheless, the concentration of half of the recovery’s net new business establishments into only 20 counties represents a massive and historically unprecedented imbalance in the geography of business creation.
And as for other U.S. counties? Well, the researchers found three out of five actually saw more businesses close than open from 2010-2014.
The Washington Post’s Wonkblog wrote about this issue, saying,
Economists say the divergence appears to reflect a combination of trends, all of which have harmed small businesses in rural America. Those include the rise of big-box retailers such as Walmart, the loss of millions of manufacturing and construction jobs across the country and a pullback in business lending that appears to have stung small-town and rural borrowers particularly hard.
If anything can be construed as a bright side to these findings, it’s this: Big cities are experiencing stronger recoveries than rural areas, and more Americans live in big cities than outside them.
In this economic recovery, 48 percent of the U.S. population lives in a county that meets or exceeds the (admittedly low) national rate of new business growth. But, 48 percent is more than during the either the 2000s recovery (43 percent) or the 1990s recovery (40 percent). In other words, a lot of people live in the few places that are holding their own in the current recovery.
The final paragraph of the Economic Innovation Group’s report sums it up:
The new map of growth and recovery points to very different futures for American communities. These findings suggest that the gains from growth have and will continue to consolidate in the largest and most dynamic counties and leave other areas searching for their place in the emerging economic landscape. While many will benefit, the new map also calls for a new toolkit for ensuring broad access to opportunity and helping both people and places realize their economic potential.