by Benjamin Glasner

Since the onset of the COVID-19 pandemic, the United States has witnessed a surge in new business formation. Despite significant declines in employment, new firms and establishments helped revitalize the national economic landscape, and this growth continued through the end of 2022, as shown in the recently released Quarterly Census of Employment and Wages (QCEW) data by the Bureau of Labor Statistics (BLS). The QCEW offers an overview of workforce and establishment patterns at the county level, enabling researchers to identify areas where the U.S. economy is undergoing transformation and where the most substantial changes to the economic geography of the country have materialized since the pandemic. Analyzing the data for the fourth quarter of 2022, it becomes evident that the national trend of burgeoning new businesses has persisted, with numerous states experiencing noteworthy year-over-year growth in establishment numbers; however, one state, Georgia, emerges as the clear leader both at the county and statewide levels.

Year-over-year employment growth is gradually pulling back nationally from its 2021 highs, yet it remained well above pre-pandemic levels in December 2022. This is in stark contrast to the ramping up of growth seen with establishments. Since 2020, the growth in establishments has remained steady, increasing throughout the pandemic and maintaining a year-over-year change of more than 5 percent since the start of 2022—a substantial increase relative to the ~2 percent growth rate from 2018 through 2019. When we look to see where the growth in establishments has been concentrated, a pattern of growth is clearly visible in the Piedmont region of the South.

We find that among U.S. counties with a population of 100,000 or more, Georgia has the top six and 14 of the top 25 counties with the largest percentage increase in establishments–all clustered in the fast-growing northern part of the state, centered around Atlanta. Fulton County led the way with a 19.6 percent jump. The significant growth in private establishments in the fourth quarter of 2022 placed Georgia as the best-performing state, with a 13.8 percent increase in the number of private establishments, year-over-year. The state’s nearly 14 percent surge translates to year-over-year growth from 342,000 to 389,000 establishments, relative to the national average of 5.6 percent. The industries which saw the largest relative increase in establishments in Georgia were nonclassifiable, Information, and transportation and warehousing services. 

Because the data is collected state-by-state through quarterly unemployment tax forms, some state-specific discrepancies can occur. Washington State has seen significant reductions in the number of healthcare establishments while experiencing nearly no decline in the number of people employed in healthcare, for example. This could be a result of administrative changes in data collection and reporting, and encourages caution when evaluating unexpected results. In the case of Georgia, significant gains in the number of establishments have been concentrated among the unclassified establishments, or those for which no industry tag has been assigned. If this were a spike in a single quarter, that could be a cause for concern, but Georgia has been seeing a steady rise for more than two years in unclassified establishments, and northern Georgia is also racking up some of the fastest population growth in the country–a strong correlate of establishment growth. Across multiple states, we have seen a rise in unclassified establishments in the QCEW, including in an underperforming New York.

New York is an interesting case because, even after taking into account the interregional movement out of the Northeast and to the South, New York and New York City in particular are on a concerning path relative to the region. New York added a mere 12,000 establishments in Q4 2022, a gain of only 1.8 percent. The number of establishments in the five-county New York City area barely increased over the year, chalking up 0.1 percent growth. This stagnation in establishments during a national boom period is a worrying sign and one that is not shared by others in the region; New Jersey (6 percent), Pennsylvania (4.4 percent), Connecticut (6.8 percent), Massachusetts (4.2 percent), and Vermont (10.7 percent) all saw significant gains. 

The upsurge in new business formation has remained robust in the years following the COVID-19 pandemic. The latest data from QCEW demonstrate how the country’s economic geography is changing and where these establishments are forming. These results align with other signals of a changing economic landscape, including the interregional movement of firms and people. More business activity, and more people, are moving to the south, while established economic centers such as New York City contend with stagnation.

Economic Dynamism Geographic Trends  

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