Number of Businesses

The number of businesses in the United States declined for the first time in nearly two decades from 2008 through 2011. The streak of steady growth in the number of businesses was broken by the largest economic downturn since the Great Depression, which restricted consumer spending and froze credit markets. Consumer spending, which expanded at an average of 3.0% per year between 2002 and 2007, fell 0.4% and 1.6% in 2008 and 2009, respectively. The fall in private spending meant a drop in demand for goods and services from existing businesses and a reduction in new opportunities for entrepreneurs. The tightening of credit markets magnified the effects of slumping demand. Credit lines for many companies were reduced or eliminated, limiting their ability to survive short-term cash flow shortages and pushing many towards bankruptcy. The lack of affordable credit also meant that fewer new ventures were launched and sole proprietors were unable to expand their operations.

However, the number of businesses in the United States has increased moderately during the period, finally escaping the downward trend caused by the recession. Recovery took hold in 2012 as accommodative monetary policy and a stronger labor market spurred economic activity. Meanwhile, expansion of businesses is likely to lag behind, as higher investment requirements and planning make these operations slower to get off the ground. As a result, the number of employing businesses in the United States increased 1.3% in 2015, the fastest rate since 2007. In 2018, continued improvements in the broader economy and the private investment landscape led to growth in the number of domestic companies, and this is estimated to have continued into 2019. In 2020, the growth rate is expected to have reversed and result in a contraction, due to the economic impacts stemming from the COVID-19 (coronavirus) pandemic. In early 2020, many businesses across the US were forced to close or limit service to abide by social distancing orders. These were put in place to prevent further spread of coronavirus. This prolonged closure led many businesses to close their establishments permanently due to the lack of income. A sharp economic recovery in 2021, driven by pent-up demand, led to increased consumer spending, benefitting businesses. This trend has continued into 2023, however, rising inflation is anticipated to hamper consumer spending. Overall, the number of businesses is forecast to increase at an annualized rate of 0.7% over the five years to 2025.