Job Churning

The number of new start-ups and business failures,
combined, as a share of all companies in each state.

WHY IS THIS IMPORTANT? Steady growth in employment masks the constant churning of job creation and destruction, as less innovative and efficient companies downsize or go out of business and more innovative and efficient companies grow and take their place. A total of 3.5 million private-sector jobs were added to the U.S. economy between 1994 and 1995, but that was after new firms had created 5.7 million jobs, failing firms had eliminated 4.5 million jobs, expanding firms had added 10.5 million jobs, and contracting firms had eliminated 8.2 million others. This churning has accelerated as the number of new start-ups and existing business failures per year has grown. While such turbulence increases the economic risk faced by workers, companies, and even regions, it is also a major driver of economic innovation and growth.

THE RANKINGS: Some fast-growing states (like Nevada, Colorado, Arizona, and Utah) have seen a great deal of churning. In part, this is because fast-growing economies produce more start-ups, especially in locally focused industries (such as restaurants, dry cleaning, or accounting). But a high churn rate also reflects a dynamism that leads to the death of old, outmoded firms and the creation of innovative new companies that sell outside the state. States with slower overall growth rates, but with dynamic business sectors, such as New Jersey, Maryland, and California, also see high rates of churn.

STATES BY RANK
Rank	State	Score
1	Nevada	4.1%
2	California	3.6%
3	Colorado	3.5%
4	New Jersey	3.4%
5	Arizona	3.3%
6	Utah	3.1%
7	New York	3.0%
8	Georgia	3.0%
9	Maryland	3.0%
10	Hawaii	2.9%
11	Idaho	2.9%
12	Washington	2.8%
13	Texas	2.8%
14	Arkansas	2.8%
15	Oklahoma	2.8%
16	Florida	2.8%
17	Tennessee	2.7%
18	Massachusetts	2.6%
19	Pennsylvania	2.5%
20	Delaware	2.5%
21	Virginia	2.5%
22	New Hampshire	2.5%
23	New Mexico	2.5%
24	Illinois	2.4%
25	Kansas	2.4%
26	Oregon	2.3%
27	North Carolina	2.3%
28	Ohio	2.3%
29	Alabama	2.3%
30	Kentucky	2.3%
31	Michigan	2.2%
32	Indiana	2.2%
33	Maine	2.1%
34	South Carolina	2.1%
35	Wisconsin	2.1%
36	Missouri	2.0%
37	West Virginia	2.0%
38	Connecticut	1.9%
39	Wyoming	1.9%
40	Rhode Island	1.9%
41	Louisiana	1.8%
42	Alaska	1.8%
43	Nebraska	1.8%
44	Mississippi	1.7%
45	Minnesota	1.7%
46	South Dakota	1.7%
47	Vermont	1.5%
48	Montana	1.5%
49	Iowa	1.4%
50	North Dakota	1.3%

	U.S. average16	2.7%

ALPHABETICALLY
State	Rank	Score
Alabama	29	2.3%
Alaska	42	1.8%
Arizona	5	3.3%
Arkansas	14	2.8%
California	2	3.6%
Colorado	3	3.5%
Connecticut	38	1.9%
Delaware	20	2.5%
Florida	16	2.8%
Georgia	8	3.0%
Hawaii	10	2.9%
Idaho	11	2.9%
Illinois	24	2.4%
Indiana	32	2.2%
Iowa	49	1.4%
Kansas	25	2.4%
Kentucky	30	2.3%
Louisiana	41	1.8%
Maine	33	2.1%
Maryland	9	3.0%
Massachusetts	18	2.6%
Michigan	31	2.2%
Minnesota	45	1.7%
Mississippi	44	1.7%
Missouri	36	2.0%
Montana	48	1.5%
Nebraska	43	1.8%
Nevada	1	4.1%
New Hampshire	22	2.5%
New Jersey	4	3.4%
New Mexico	23	2.5%
New York	7	3.0%
North Carolina	27	2.3%
North Dakota	50	1.3%
Ohio	28	2.3%
Oklahoma	15	2.8%
Oregon	26	2.3%
Pennsylvania	19	2.5%
Rhode Island	40	1.9%
South Carolina	34	2.1%
South Dakota	46	1.7%
Tennessee	17	2.7%
Texas	13	2.8%
Utah	6	3.1%
Vermont	47	1.5%
Virginia	21	2.5%
Washington	12	2.8%
West Virginia	37	2.0%
Wisconsin	35	2.1%
Wyoming	39	1.9%

Source: Dun & Bradstreet, 1995-1996 data.

Download PDF Version of This Report (1.1MB)
(PDF version requires Acrobat Reader)

The Progressive Policy Institute (PPI)
Technology, Innovation, and New Economy Project
600 Pennsylvania Ave., S.E., Suite 400, Washington DC 20003
Phone: (202) 546-0007
www.ppionline.org

Website design by OnlineWorkshop.