Magazine article Business Credit

U.S. Business Starts Decline 7 Percent in 1998

Magazine article Business Credit

U.S. Business Starts Decline 7 Percent in 1998

Article excerpt

But service and retail sectors remain strong breeding grounds for entrepreneurial activity

Entrepreneurial activity in the U.S. is still vigorous, despite a modest dip in business starts last year. Start-ups in the U.S. declined in 1998 by 7 percent, and employment generated by business starts fell from the 1997 levels by 4 percent, according to data from The Dun & Bradstreet Corporation. The number of start-up establishments identified by Dun & Bradstreet (D&B) in 1998 declined to 155,141 from 166,740 in 1997. Among business starts reporting employment numbers to D&B, the number [TABULAR DATA OMITTED] of new jobs created fell to 906,105 in 1998 from 939,310 in 1997.

The decline in business starts may be due, in part, to the robust economy and strong job market in 1998. As the economic expansion continued unabated, the security of continuing to work for established larger firms may have proven more attractive to some would-be entrepreneurs. In a weaker economic environment, with rising unemployment rates, employees laid off by larger firms may be forced to go it alone, pushing up new business starts. Looking ahead, it appears that the solid growth in the U.S. economy of the past year will continue well into 1999, as long as the lid is kept on inflation and high consumer spending levels hold firm.

Business Starts Decline in Every Major Industry Group Except Agriculture and Finance

Declines in business starts were recorded in nearly every industry sector in 1998. Wholesale trade posted an 11 percent drop from 1997, to 13,983 from 15,780. Related employment in the wholesale sector also fell for the period, by 4 percent. The manufacturing sector posted a 10 percent decline in business starts to 11,876 in 1998 from 13,144 in 1997. Related job creation in the manufacturing sector also fell off, by 11 percent. In the construction sector, D&B identified 8 percent fewer start-ups in 1998 than were found in 1997, and associated job creation was also lower for the period, down 4 percent. The greatest percentage decline in business starts in 1998 (24 percent) was recorded among nonclassifiable establishments - start-up businesses identified by Dun & Bradstreet with incomplete information on the nature of the businesses. Comparison as a group from year to year is not reliable.

The agriculture, forestry and fishing sector registered an 8 percent rise in business starts for 1998, to 2,451 from 2,275 in 1997, and employment from start-ups in the sector also rose for the period, by 1 percent. The finance, insurance and real estate sector logged a 1 percent rise in start-ups for 1998 to 12,317 and posted a 6 percent bump in job creation from business starts for the period to 75,113. Start-ups among transportation and public utilities firms were clown slightly at 2 percent, but related job creation was up 1 percent for the period. The mining sector recorded a notable decline in business starts for 1998, down 10 percent to 588 from 655 in 1997. However, the sector had the greatest percentage increase in jobs created by start-ups in 1998, jumping 60 percent from the year-ago period to 6,790 from 4,248.

Service and Retail Sectors Remain Dominant Fields for Start-Ups

Service and retail businesses continue to pe the places where the greatest numbers of entrepreneurs are focusing their attentions. …

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