NCPA - National Center for Policy Analysis

Business Start-Ups Declining

January 28, 1999

In a trend that began in 1996, the number of new business starts is declining, according to a study by the National Federation of Independent Business. Paradoxically, the cause seems to be the strength of the U.S. economy.

People who might have started up their own businesses because of being laid off, or because they feared losing their jobs, now feel secure and see no need to venture forth on their own at a time when employers are desperate for workers.

  • In 1995, 3.5 million businesses were launched in the U.S.
  • That number dropped by 14 percent in 1996.
  • In 1997, the number declined by 4 percent -- to only 2.9 million starts.
  • Preliminary figures for 1998 point to another decline.

Regionally, the declines were most severe in the Midwest -- where business starts slipped 12 percent in 1997. They were least noticeable in the Southeast -- where they fell just 2 percent.

At the same time, fewer small businesses are failing. Only 1.3 million small businesses folded in 1997 -- down from 1.6 million in 1996.

Source: Joshua Harris Prager, "Start-Ups Drop Despite Strong Economy," Wall Street Journal, January 28, 1999.


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