America’s Small Counties Are Struggling To Recover From The Recession

May 23, 2016

It may appear to be a great time for anyone who has an innovative idea to act on it and start a new business with it. After all, there is a flood of new startups receiving funding for a new gadget that promises to make life easier or solve a problem you didn’t even know you had. Small businesses are fine, even thriving, right?

Well, maybe not. While there does seem to be a lot of startups popping up on the business landscape, they are generally concentrated in a few areas. As The Washington Post reports, in the early 1990s economic recovery, 125 counties combined to generate half the total of new business establishments in the country. In the current recovery 50 percent of the growth has come from just 20 counties, all of which are larger in scale.

As for people living in some of America’s smaller towns and rural communities, it is dramatically less likely than in the past that people will start a new business there, meaning large portions of the country could be staring into a future of economic hardship if something doesn’t change.

While more densely populated areas are holding steady in their startup formations, more rural areas are taking a nose dive in terms of their business formation. Some of the main things that are hurting small businesses in rural America are the rise of big-box retailers, the loss of millions of manufacturing and construction jobs across the county, and a slowdown in business lending whose effects have been much more acutely felt by small-town and rural borrowers. Additionally, many people see recent wage hikes in some places that set a minimum wage of $15 as particularly harmful to small businesses who can’t afford to pay that much.

Between 2010 and 2014, U.S. counties with 100,000 people or less combined to lose more businesses than they created. This occurred despite the national economy improving and the unemployment rate falling. For comparison, in 1992, these same counties created a third of the nation’s new businesses on net.

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