Business Dynamics Statistics Trace Evolution of Job Growth, Employment at U.S. Firms Over Four Decades

The evolution of job growth and employment in the U.S. economy over the past four decades has been characterized by two important but seemingly contradictory facts: Young start-up businesses have been a key driver of economic growth, yet more and more of the American workforce has become concentrated at older, more mature firms.

This window into the nation’s economic trends comes from the U.S. Census Bureau’s Business Dynamics Statistics (BDS), which provide annual measures of establishment openings and closings, firm startups and shutdowns, and job creation and loss.

One of the major trends over the past three decades is that employment has become increasingly concentrated at older firms.

The BDS paints a portrait of the constantly evolving and dynamic U.S. economy over time and provides information on the contributions to employment changes across and within industries.

These measures are available for the entire economy and by industry (sector and 3-digit and 4-digit North American Industry Classification System or NAICS) and geography (state, county and metropolitan and micropolitan statistical areas).

They’re also published by firm and establishment size and age. Statistics are available from 1978 to 2019.

In this story, we summarize recent findings using the publicly available statistics to describe the dynamics of the U.S. economy over the past 40 years. We specifically focus on the role firms of different ages and sizes played in the creation of jobs across various industries.

Age and Size of Firms

As prior research has shown, the age and size of a business are important characteristics that may reflect its potential to create jobs and economic growth.

The BDS allows us to distinguish between the age and size of an establishment (a physical place of work) and the age and size of the firm (the larger enterprise that owns and operates the establishment).

Firm age is defined as the age of the oldest establishment in the first year in which a firm has employees. We define a startup as any firm that employed its first worker in the current year.

New establishments created by new firms will have job creation patterns that resemble other startups. But new establishments created by long-existing firms will grow in ways that reflect the trends of mature firms.

In addition, an establishment that belongs to a larger parent company may act differently than an independent establishment.

For the purposes of this article, we focus on two age categories: young and old. Young firms are those with positive employment for five years or less, and old firms are those with positive employment for more than five years.

A firm’s size is based on the first-quarter employment of a given year and includes all establishments associated with the firm at that time. We consider firms with 100 or more employees “large,” and those with fewer than 100 employees “small.”