Idaho generally outpaces the nation in its share of startups relative to its labor force. In 2022, the state had a peak of 11 new private establishments for every 1,000 Idahoans in the labor force. In comparison, the U.S. had roughly seven new private establishments for every 1,000 civilians in the labor force. Despite Idaho’s momentum, startup growth tapered off slightly in 2023 at 9.5 per 1,000, which falls closer to the U.S. ratio of six per 1,000.
Looking at new startups in Idaho and the U.S. that have operated for less than a year provides a glimpse of economic health both in new industry establishments and employment. Between 1994 and 2023, Idaho’s annual number of new private establishments grew from 3,249 to 9,215. This was a 183.6% increase, or 6.3% on an annual basis, despite the recent drop in 2023. By comparison, the number of new establishments nationwide grew 85.1%, or 2.9% on an annual basis, shown in Figure 1.
Between 2021 and 2022, Idaho experienced an increase in new private sector establishment startups, jumping from 8,171 to 10,115, respectively. However, 2023 saw a slight decrease of 8.9% from 2022, falling to 9,215 startups.
“This recent drop could be attributed to still-elevated inflation, tight labor availability and high borrowing rates,” Idaho Department of Labor Economist Ryan Whitesides said. “However, in perspective, 2023’s number of startups are still higher than 2021’s, when Idaho was enjoying such rapid and unprecedented startup growth.”
*Note the 2023 figures are preliminary. Revisions may be applied next year to the Bureau of Labor Statistics Business Employment Dynamics data from which these figures are derived.
Source: Business Employment Dynamics (BED), The U.S. Bureau of Labor Statistics (BLS)
The share of new private establishments compared to the total number of private establishments has somewhat tracked for both the state and nation, as shown in Figure 2. For eight years between the mid-1990s and early-to-mid 2000s, Idaho’s ratio was equal to that of the nation. However, that trend changed.
“With economic recovery after 2013, Idaho separated itself in a positive direction from the U.S. and hasn’t looked back since,” Whitesides said.
From 1994 to 2004, the share of new private establishments hovered around the 10-11% range both in Idaho and the U.S. In the leadup to the Great Recession, Idaho’s share grew to around 12% before plummeting to about 7% in 2010; nationwide, it bottomed out at 8% the same year. By 2022, roughly 16 out of every 100 private establishments were in operation for less than a year compared to 12 out of 100 nationally. In 2023, this rate slightly diminished to just under 15% along with a gentle decline nationally. Subtle downturns in the share of new establishments out of total private establishments also occurred in 2017 and in 2020 for Idaho but rebounded in subsequent years.
Source: BED, BLS
Naturally, new jobs are created as a result of new establishments opening. However, new private establishments now account for a smaller share of private jobs than they did in the 1990s. Figure 3 plots the employment of new private establishments in Idaho and the U.S. from 1994 to 2023. Statewide, total employment from startups grew from around 15,000 in 1994 to just over 26,000 in 2023, a 73.3% increase, or 2.5% annually. However, nationwide, total employment from startups dropped 10.1% over the same period, or 0.3% per year.
“Over the past 13 years, Idaho finds itself in a mostly positive job growth trajectory in terms of startups,” Whitesides said.
Source: BED, BLS
For both Idaho and the U.S., the average number of jobs per new startup actually showed a slight uptick in 2023 despite the decrease in total startups, shown in Figure 4. In Idaho, there has been a total employment increase of over 400 workers at new private establishments since 2022. At its peak in 2001, new private establishments in Idaho employed an average of around six employees, while nationwide the average was 6.5 employees. Since 2006, neither the nation nor the state have been able to average more than six workers per new private establishment.
“This could be because new establishments are increasingly too small to afford many employees, or they may require fewer people due to innovations in technology,” Whitesides said.
Source: BED, BLS
Figure 5 represents the share of total private employment of new establishments over time for Idaho and the U.S. During its peak in 2001, over 5% of total private employment in Idaho was from newly formed establishments. Even though new private establishment growth has accelerated since then, the employment share hasn’t recovered to this level. The year 2022 had the highest new establishment employment since 2007, but the rate has since declined to 3.6% in 2023.
“Total private establishment employment continues to increase year over year statewide and nationally, but it is unclear if employment at new establishments will keep pace,” Whitesides said. “Meanwhile, Idaho continues to outpace the nation in the share of new establishment employment out of total private employment.”
Source: BED, BLS
Between 1994 to 2023, Idaho had historically higher-than-average “entrepreneurship rates,” that is, startups per 1,000 civilians in the labor force (CLF). The average rate over this time was 5.9% for Idaho and 4.6% for the U.S. The state also had higher-than-average startup failure rates compared with the nation from 1994-2023 — an average of 22.4% for Idaho and 21.3% for the U.S. Since 2016, startup failure rates in the state have mirrored the national rates. Recent estimates from 2022 to 2023, shown in Figure 6, indicate entrepreneurial confidence is somewhat wavering — more so nationally than statewide.
In regard to this change, Whitesides said, “The sensitivity to inflation and higher borrowing costs for startups may be the impetus for the pull-back of prospective entrepreneurs. Individuals are less inclined to take risks unless they have reassurance their startup business will survive.”
Source: BED, BLS
The reduction in startups correlates to a reduced failure rate lag the subsequent year, shown in Figure 7. Even if startup activity may be high in the state or nation one year, it may be followed by high startup failure rates the following year or as the business cycle dictates.
Source: BED, BLS
Alternative startup growth measures: Business applications and formations
Data from the U.S. Census Bureau’s Business Formation Statistics tracks new monthly business applications, which can be compared in the U.S. and Idaho over time. In 2023, Idaho had 2,613 new business applications per month, up 4.8% from 2022, and a substantial 31.1% increase from pre-COVID 2019. Nationwide, there were 457,180 new business applications per month in 2023, up 7.3% from 2022 and an even more impressive 35.9% increase from 2019.
During the 2010s, applications for all businesses in the U.S. rose from a seasonally adjusted average of 200,000 per month to just over 300,000 per month. Nationally and statewide, more people than ever before are submitting business applications despite the perceived obstacles; but the follow-through to startup is a different story.
“It’s likely these new business application increases reflect shifting economic conditions and attitudes in the wake of COVID-19,” Whitesides said. “Some business owners may feel that conditions are unfavorable, while others are motivated and willing to take the risk to launch new businesses.”
Figures 3A and 3B denote the correlation between “establishment births”— both new startups and reopenings of existing seasonal establishments — and new business applications. This is based on conceptual new businesses that actually materialized into new startups. In Idaho from 2020 to 2023, business applications increased at a higher rate than ever, thanks in part to new startup capital from COVID-19 federal aid. As expected, this resulted in new establishment births increasing dramatically, shown in Figure 3A. While business applications have continued on an upswing for the state since the pandemic, new establishment births have not materialized yet and have been in decline since 2021. A rise in new business applications also holds true with the nation, except for a momentary drop from 2021-2022 that rose back up again thereafter, as shown in Figure 3B.
Sources: U.S. Census Bureau; U.S. Bureau of Labor Statistics-Business Employment Dynamics
Note: 2023 Idaho and U.S. Establishment Births are estimates for Q3 and Q4
Note: This article is an updated annual scan of business startup activity since the previous year’s report.
Ryan.Whitesides@labor.idaho.gov, regional economist
Idaho Department of Labor
(208) 557-2500 ext. 3628
This project is 100% funded by the U.S. Department of Labor as part of an Employment and Training Administration award totaling $695,785.