A few states can answer yes, as I explained in a companion piece on 10 states that are gaining business. But weak hiring has become a chronic national problem, and many states are losing businesses when they ought to be gaining them. New-business creation is one of THE key factors determining the unemployment rate, since young, growing firms typically hire more people than big or established companies. A depressed rate of new-business creation is one of the biggest reasons that unemployment remains high, and the economy weak.
To determine which states seem to be losing businesses, I used data provided by economic consulting firm EMSI of Moscow, Idaho, showing business establishments per capita. Since the data control for population, they allow for comparisons between populous states like California and Texas and less populated ones like Rhode Island and Nevada. I was interested in each state's performance over the last few years, to account for the recent recession, so I measured the change in business establishments per capita from the beginning of 2008 through the end of 2010.
I also excluded states with an unemployment rate below the national average of 9.1 percent, because those states tend to be gaining population and businesses both, and outperforming the national economy. They may be gaining population faster than new businesses right now, but that could change as business creation improves. That took eight states off the list: Utah, Colorado, Minnesota, Vermont, Maine, Alaska, New Hampshire, and Maryland. That left the following 10 states as those with above-average unemployment and the worst rates of lost businesses:
Arizona. Businesses per person in 2008: 0.85; in 2010: 0.75. Unemployment rate: 9.4 percent. The housing bust has decimated the Arizona economy, with many lost businesses in construction and real estate.
Nevada. Businesses per person in 2008: 1; in 2010: 0.93. Unemployment rate: 12.9 percent. Like Arizona, Nevada is struggling with one of the worst housing busts in the country. The state also suffers from overbuilding in Las Vegas and sharp cutbacks in tourism since before the recession.
South Carolina. Businesses per person in 2008: 0.88; in 2010: 0.83. Unemployment rate: 10.9 percent. The old textile industry has all but disappeared, and depressed trade has hit the port city of Charleston. South Carolina has struggled to come up with replacement industries.
Idaho. Businesses per person in 2008: 1.22; in 2010: 1.18. Unemployment rate: 9.4 percent. Idaho has gained some technology businesses and benefited from entrepreneurs fleeing high-cost California. But that has been offset by losses in the lumber industry—closely tied to construction.
Florida. Businesses per person in 2008: 1.15; in 2010: 1.1. Unemployment rate: 10.7 percent. Economic clouds have blanketed the Sunshine State, where the housing bust has been intense. For the first time in decades, Florida has suffered a net outflow of people.
Georgia. Businesses per person in 2008: 0.95; in 2010: 0.92. Unemployment rate: 10.1 percent. Overexuberant banks lent way too much money earlier in the decade. The sharp pullback in lending has soured business on the Peach State.
Alabama. Businesses per person in 2008: 0.85; in 2010: 0.83. Unemployment rate: 10 percent. Jefferson County, home to Birmingham, the state's biggest city, is on the verge of bankruptcy. Would you open a business there?
North Carolina. Businesses per person in 2008: 0.93; in 2010: 0.91. Unemployment rate: 10.1 percent. Charlotte-based Bank of America, one of the state's biggest employers, has been reeling. Tourism, another big part of the economy, is down too.
Michigan. Businesses per person in 2008: 0.87; in 2010: 0.86. Unemployment rate: 10.9 percent. Detroit's automakers are back on their feet, but the dramatic downsizing of the auto industry has deeply hurt the Michigan economy.
Tennessee. Businesses per person in 2008: 0.77; in 2010: 0.76. Unemployment rate: 9.8 percent. Tennessee lost the former Saturn plant in Spring Hill, and is struggling due to slowdowns in auto production and other industrial activity elsewhere. That affects many small businesses dependent on bigger producers.