New businesses opening with fewer employees

Data from the U.S. Bureau of Labor Statistics (BLS) shows that while the number of new establishments created each quarter is increasing, the jobs they generate have been decreasing since the late ’90s. The average new establishment currently employs half as new establishments did 30 years ago, a phenomenon identified as the shrinking ‘birth weight’ of start-ups.

This is significant for job creation in the US economy as new businesses – specifically those less than a year old – are key drivers behind net job gains in the US economy, according to the BLS.

The decline in jobs is visible during the early years of a business’s life. Businesses born in the 2010s employ fewer people at 1-, 3-, and 5-year marks compared to those born in the 1990s. For example, start-ups from 1994 that survived five years grew to an average of 13.2 employees. In contrast, those born in 2017 that survived the same period grew to an average of only 8.2 employees.