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California's net business creation falters

August 23, 2011 | 10:09 am


Between 2001 and 2009, California ranked either first or second in the nation for creation of net new business establishments. No longer. In 2010, the state plummeted to 50th, losing 4,600 business establishments from the prior year, according to a study by Economic Modeling Specialists Inc.

Economic Modeling Specialists Inc. calculates net new business creation by using the Quarterly Census of Employment and Wages from the Bureau of Labor Statistics.

In 2008, California had 32,829 net new businesses established. In 2009, that number slipped to 12,529, and last year, the state lost 4,632 businesses from the year before. The Golden State wasn't alone in seeing its business creation drop. Between 2009 and last year, 29 states saw their net business establishments decline, including Michigan and Ohio, all states suffering from high unemployment rates.

That's a startling contrast with Washington, for example, which created 2,531 net new businesses in 2008, 3,565 in 2009 and 8,315 last year. It ranks first in the Economic Modeling Specialists Inc. study. Other states that succeeded in creating new business establishments were Massachusetts, Texas, New York and Illinois.

Entrepreneurs often complain about stringent environmental regulations and government red tape in California as obstacles to doing business.


California's jobless rate grows to 12% in July

Companies are afraid to hire, even if business is improving

California's business tax burden is no heavier than average

-- Alana Semuels

Image: Graph of net new business formation. Credit: Economic Modeling Specialists Inc.