- Some industries and states recovered more quickly than others following the Great Recession.
- Companies battled to stay viable in the aftermath of the financial crisis and its knock-on effect on the rest of the economy.
To overcome the financial obstacles posed by the pandemic and its aftermath, it’s critical to have a strong awareness of the state of business development and longevity in the United States before the current COVID-19 crisis, says an article published in IB Madisons.
CommercialCafe recently released a new study that offers an overview of the U.S. business landscape between 2008 and 2018. The study examines net gains or losses in the total number of active businesses. It also looks at specific industries and states in which these changes were most notable.
“The recession that began in 2008 led to many upheavals in the U.S. economy — from home foreclosures and major financial institutions defaulting to business closures throughout the nation,” notes CommercialCafe’s Diana Sabau. “In fact, in 2008 alone, the country lost nearly 120,000 enterprises — and that downward trend continued for another few years. By 2018, the U.S. economy had recouped and increased its total number of active companies, but the progress proved to be uneven across industries, as well as states.”
This report compiles the most recent U.S. Census data for the continental states and Washington, D.C. for the following metrics: average business age; average business size (number of employees) and share of employed labor force in each state; and the number and distribution of businesses across sectors of the economy.
Wisconsin was notable in a few areas:
- Wisconsin had around 115,000 active businesses in 2008, and little more than 109,000 firms in 2018, closing off the 10-year period with a 5% decrease.
- However, businesses providing educational services increased by 182 firms — a 13% hike over the 10-year period.
- Wisconsin has among the oldest businesses in the country, with 43% of companies here having been active for more than 16 years, while 11% of businesses are younger than two years.
- About 84% of the total number of companies in the state have fewer than 20 employees, and only 3% employ more than 500 people.
2008–2018: An economic retrospective
In the aftermath of the financial crisis and its domino effect on the rest of the economy, companies struggled to stay afloat, notes Sabau. Moreover, until 2012 — when the trend slowly changed course and started inching closer to pre-recession values — the U.S. had witnessed the closure of roughly 204,000 companies. By 2018, the number of U.S. businesses had increased from 5.9 million to an estimated 6.1 million, following a 2.5% growth throughout the decade. Washington, D.C., and New York were the first to bounce back from the crash in 2010.
Wisconsin, like many Midwestern states, was not as hard hit by the Great Recession. Meanwhile, California, Colorado, Nebraska, South Dakota, and Utah bottomed out in 2011. Nevada rounded out the list of the top 10 fastest-recovering states after the recession.
In California, the overall expansion of the hospitality sector played a significant role in replacing some of the lost jobs and companies due to the decline of defense spending. Roughly 35,500 manufacturing firms went under between 2008–2018, but the number of construction businesses also fell by 5.5%, going from approximately 761,000 to 719,000. Indeed, the retail industry took the brunt of the blow, losing most businesses throughout the study period. The fall was caused by many concurrent shifts that have been transforming the U.S. economy since 2008, the most notable of which being the migration to e-commerce and increased difficulties refinancing retail assets. By 2018, over 50,000 businesses had failed, representing a 7 percent reduction. California, Ohio, Illinois, and Pennsylvania were among the states hardest hit by the dip.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: IB Madisons