oregon business dynamics
TRANSCRIPT
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Oregon’s Business Dynamics
Entrepreneurship, Start-ups, Employment, Business Formation, R&D and Innovation
Oregon Office of Economic Analysis
2Oregon Office of Economic Analysis
Low Levels of Business Formation
6%
7%
8%
9%
10%
11%
12%
13%
1990 1995 2000 2005 2010 2015
Fewer New FirmsStart-ups as Share of Total Businesses
U.S. Oregon
Source: Census Bureau, Oregon Office of Economic Analysis
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Jan-95 Jan-00 Jan-05 Jan-10 Jan-15
New Incorporation FilingsOregon Secretary of State Business Filings
New Incorporations 12 Month Average
3Oregon Office of Economic Analysis
Start-Ups Employing Fewer
0%
1%
2%
3%
4%
5%
6%
1980 1985 1990 1995 2000 2005 2010 2015
Nobody Works for a Start-UpEmployment, Share of Total
U.S. Oregon
Source: Census Bureau, Oregon Office of Economic Analysis
1
2
3
4
5
6
7
8
10
20
30
40
50
60
70
80
1994 1998 2002 2006 2010 2014
Where Are the Start-Ups?Job gains at new establishments, 4 Qtr Sum
<-- Oregon, ths
U.S., millions -->
Source: BLS, Oregon Office of Economic Analysis
4Oregon Office of Economic Analysis
Impacting All Sectors and Areas
6%
8%
10%
12%
14%
16%
1980 1985 1990 1995 2000 2005 2010 2015
Fewer Start-Ups NationwideNew Firms as Share of Total Businesses
Source: Census, Oregon Office of Economic Analysis
WestSouth
Northeast
Midwest
40
60
80
100
120
140
1994 1998 2002 2006 2010 2014
Start-Up Employment Across IndustriesIndex of Jobs at New U.S. Firms, 2000 = 100
Source: BLS, Oregon Office of Economic Analysis
Local Sector
Traded Sector
5Oregon Office of Economic Analysis
Waning Dynamism?
10%
12%
14%
16%
18%
20%
22%
1992 1995 1998 2001 2004 2007 2010 2013
Labor Market Churn on the DeclineShare of Workers Either Gaining or Losing a Job
Oregon U.S.
Source: BLS, Oregon Office of Economic Analysis
89%
9%2%
26% 24%
50%
20% 22%
59%
0%
20%
40%
60%
80%
100%
< 20 20-99 100+
Firm Size (Employment Count)
Oregon Business SizeShare of 2014 Statewide Totals
Firm Count
Employment
Wages
Source: Oregon Employment Department, Oregon Office of Economic Analysis
6Oregon Office of Economic Analysis
Reasons Given for Fewer Start-Ups
• Pace of technological change moderating?
• Fewer Americans in their 30s?
• High student loan debt?
• Health insurance and job lock?
• Foreign immigration is down?
• Shock of the Great Recession?• Regulation (financial, healthcare)?
• Policy uncertainty (Fed, Europe, DC, Middle East)?
Source: Mark Zandi, Moody’s Analytics, 2014
7Oregon Office of Economic Analysis
Does it Matter? Maybe
• Small or new are not the operative words, it’s the start-ups that take off that matter most
• Strongest job growth comes from fast growing, young firms• So-called Gazelles
Source: Federal Reserve Bank of Atlantahttp://macroblog.typepad.com/macroblog/2014/02/the-pattern-of-job-creation-and-destruction-by-firm-age-and-size.html
8Oregon Office of Economic Analysis
Does it Matter? Maybe Not
• Big Firms can Innovate• Overall innovation and
R&D is important, exact location less so
• Possible that in past, big firms spun off new ideas into start-ups. Today they retain in-house. Or buy start-ups at earlier stage and incorporate into business.
• Risk is loss of flexibility in bureaucracy
• Economies of Scale• Some industries lend
themselves to higher efficiencies
9Oregon Office of Economic Analysis
U.S. Research & Development Steady
• U.S. R&D fairly steady over time, as private business R&D makes up for Federal decline
• U.S. 2.85%
• OECD Avg 2.37%
• U.S. ranks 10th
highest among OECD
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1960 1970 1980 1990 2000 2010
U.S. Research & DevelopmentR&D Expenditures as Share of GDP
Source: National Science Foundation, Oregon Office of Economic Analysis
Nonfederal R&D
Federal R&D
10Oregon Office of Economic Analysis
Oregon Investments Steady Too
Venture Capital Capital Income
10
20
30
40
50
60
70
80
90
100
$0
$200
$400
$600
$800
$1,000
$1,200
1996 2002 2008 2014
Mill
ion
s
Oregon Venture Capital4 Qtr Sum, 2014$
Source: PwC/NVCA MoneyTree Report, Thomson Reuters, Oregon Office of Economic Analysis
<-- Real Venture Capital Total
No. of Deals -->
20%
30%
40%
50%
60%
1960 1970 1980 1990 2000 2010
Oregon Gross Operating Surplus Capital Income, Share of GDP
Gross Operating Surplus (Capital Income) = Corporate Profits + Consumption of Fixed Capital +Net Interest & Misc Payments. Source: BEA, Oregon Office of Economic Analysis
Total All Industries
Ex Comp/Elec Products
11Oregon Office of Economic Analysis
Homegrown Does Matter
• “Historical accident” key feature of where firms start
• Locally sourcing businesses needs helps support middle-wage jobs• Build office staff,
sales team, production lines, transport product to market, etc
$0 $20,000 $40,000 $60,000 $80,000
Food Prep
Agriculture
Personal Care
Bldg Maint
Sales
Transportation
Health Support*
Production
Admin Support
Community Service
Arts, Design, Ent
Install, Maint, Repair
Teachers
Protective Service
Construction
Scientists
Business & Finance
Comp / Math
Arch / Eng
Health Practitioners
Legal
Management
Occupations & Median Wages
State: $35,850
Inn
ova
tive
Po
pu
lati
on
Dri
ven
Bu
sin
ess
Sup
po
rtSe
rvic
e
12Oregon Office of Economic Analysis
Summary
• Business formation and start-up employment is at or near all-time low
• Economic consensus: “This looks bad”• Reality is murky
• Small and new is not always better, but gazelles are usually biggest source of net job growth
• Economic development• Homegrown businesses better than recruitment
• Also support middle-wage jobs with local sourcing
13Oregon Office of Economic Analysis
Contact
www.OregonEconomicAnalysis.com
@OR_EconAnalysis
(503) 378-4052