Business Establishment Births and Deaths: Good News Coupled with Some Concerns  

By SBE Council at 27 October, 2023, 6:54 pm

by Raymond J. Keating –

The latest “Business Employment Dynamics” report from the U.S. Bureau of Labor Statistics offers additional information on the state of new business creation and closures. This adds a bit to SBE Council’s recent analysis “The Entrepreneurship Puzzle: Are Business Applications Converting to Actual Launches?”

The BLS report presents the latest numbers of business establishment births and deaths. As noted in our recent analysis, “establishments include different locations for the same business” but “at the same time, new establishments will capture new firms as well, including one-person businesses.” So, births cover more than new businesses, but also new locations for existing businesses.

The latest births data is for the first quarter of 2023, and it pointed to 331,000 births. That continues a strong level that has been established in each quarter post-pandemic, particularly since the start of 2021.

Meanwhile, this BLS report also offers data on business establishment deaths, but with more of a lag in the numbers. So, the latest picture is from the second quarter of 2022. Again, as we noted in our previous analysis, a “pickup in deaths is expected with the rise in births, as entrepreneurship is an endeavor rich with risk and uncertainty, and failure is not unusual. The key is to see robust births, with deaths lagging well behind births, as has been the case post-pandemic.”

In the second quarter 2022, births did outdistance deaths, with births at 365,000, and deaths at 322,000. However, it also must be noted the number of business deaths in the second quarter 2022 was the second highest on record, only exceeded by 327,000 in the pandemic second quarter of 2020.

In addition, 322,000 establishment deaths in the second quarter 2022 was notably up from the previous three quarters that ranged between 245,000 and 255,000.

The bottom line of this latest BLS report is that the good news continued on business establishment births, while the increases in establishment deaths warrants watching going forward.

Indeed, it should be kept in mind that the positives on establishment births have been occurring in a federal policy environment generally unfriendly to entrepreneurship and investment due to anti-growth tax, regulatory, trade, government spending and monetary policies, and/or proposed measures.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.