Monday, December 15, 2008

Where Did Idaho's Jobs Come From?

From 2000-2007...

*** New businesses created around 297,000 jobs
*** Expanding businesses created around 200,000 jobs
*** Businesses moving in created around 10,000 jobs.

Please read those numbers again. (Counting the jobs that exited, Idaho gained ~70K jobs overall...)

Smaller Firms versus Larger Firms [again, 2000-2007]

Idaho firms under 10 employees: Created 88,626 jobs
Over 10 employees: Lost 21,312 jobs

Conclusion: Smaller firms, especially growing firms, generate the bulk of new jobs for Idaho (just the same as everywhere else)

However... businesses do close their doors, others shrink, still others move out of state - this kind of turnover or 'churn' is normal and healthy. Could we do better, though?? Of course.

Let's Look at the Net Job Gains (the dynamics of Idaho employment)

Businesses opening: created 296,983 jobs
Businesses closing: destroyed 291,824 jobs

>>>>>>> Net jobs from business creation/destruction: +5,519 jobs

Business expansions: created 200,383 jobs
Business contractions: destroyed 135,602 jobs

>>>>>>> Net jobs from business expansion/contraction: +64,781 jobs

Businesses moving into Idaho: created 10,555
Businesses moving out of Idaho: destroyed 10,757

>>>>>>> Net jobs from business attraction/recruitment: -202 jobs

[all this adds up to an increase of 69,738 net new jobs]

Idaho entrepreneurs, whether starting a new business or especially growing their business, are key to growing Idaho! Thus...

Idaho needs more high-potential startups
Idaho needs more high growth firms
Idaho also needs to do a better job of reducing exits and contractions.

Do we know how to do this? Definitely.

Does this fit with the state's Project 60? Definitely.

And What About Today? (2005-2007)

From 2005-2007, job creation for Idaho dropped - and jobs created by those new businesses dropped significantly. Idaho is now only 37th in terms of jobs per startup, not nearly enough to offset jobs lost by exiting businesses.

New startups created 74,351 jobs [proportionately lower]
Exits destroyed 77,996 jobs [proportionately a bit higher]

>>>>>>> Net = a loss of 3645 jobs [definitely a current weak point]

Expanding firms created 49,093 jobs
Contracting firms destroyed 26,156

>>>>>>> Net = a gain of 22,937 jobs [definitely our success story]

In-migrants created jobs 2,646
Out-migrants destroyed 1,270

>>>>>>> Net = a gain of 1,376 jobs [still small but an improvement over 1993-2005]

Suddenly, Idaho is losing a lot of ground on job creation by startups. We are also losing ground on business expansion (relative to contractions) but clearly the current shortfall is in generating startups with solid growth potential (and helping them to grow). Consider these totals:

Startups & growing firms created 123,444 jobs in 2005-2007 alone [497,366 in 2000-2007]

Exiting firms & shrinking firms destroyed 104,252 jobs in 2005-2007 alone [356,605 in 2000-2007]

Some of you wonder why I seem obsessed about entrepreneurship's importance in economic development... maybe these numbers help?

(technical note: data is from NETS, the National Establishment Time Series -however, other data sources show the exact same patterns. The key difference is that this covers “establishments” - new businesses plus expansions to a new location in-state.) There's data at the county & industry level - let me know if interested.