Alaska Free Fall: Losing New Businesses Faster than ANY Other State

entrepreneurs

The American economy is less entrepreneurial now than at any point in the last three decades. That’s the conclusion of a new study out from the Brookings Institution, which looks at the rates of new business creation and destruction since 1978.

Not only that, but during the most recent three years of the study — 2009, 2010 and 2011 — businesses were collapsing faster than they were being formed, a first. Overall, new businesses creation (measured as the share of all businesses less than one year old) declined by about half from 1978 to 2011.

The authors don’t mince words about the stakes here: If the decline persists, “it implies a continuation of slow growth for the indefinite future.” This lack of economic dynamism, particularly the steep drop since 2006, may be one reason why our current recovery has felt like much less than a recovery. As Matt O’Brien noted on Wonkblog last week, annual job growth rates have stubbornly refused to budge above 2 percent for the duration of the recovery.

The authors of the Brookings study dug beyond the national numbers to look at the change in new firms at the state and metro levels and found that they generally mirrored the national trends.

. . . Alaska had the largest drop in new business, at 61 percent. Hawaii, Vermont, New Mexico and Wyoming rounded out the bottom five. Teasing out the causes of the overall decline or the variation between states is difficult; the authors stressed to me that their data don’t answer the questions of why or how just yet. But they will be looking into that in the months ahead.