3. Oregon Office of
Economic Analysis
3
• In past severe recessions
like the early 1980s and
the Great Recession, the
economy experienced an
increase in firm closures
and decrease in start-ups
• Takes time to replace lost
firms and their role in the
economy, slowing overall
recovery
Permanent damage is major risk
4. Oregon Office of
Economic Analysis
4
• No good real-time data on
business closures
• Closures take time, especially
given small Oregon businesses
received $7 billion from the
Paycheck Protection Program
• What little information we have
• OLCC liquor license renewals are
normally 98%, in June fell to 92%
• Currently 94% of video lottery
retailers are reporting sales
• While closures are up, and likely
to rise further as recession drags
on, new start-up activity is
holding steady
• It is still early in the cycle, but it is
possible this recession the
economy sees a rise in closures
but no drop off in start-ups,
helping support the recovery
So far start-ups holding steady
Weekly Census Data Monthly Secretary of State Data
6. Oregon Office of
Economic Analysis
6
• Long-term economic
growth largely about how
many workers there are
and how productive each
worker is
• Productivity growth not
well understood but strong
economies, business
investment, and start-ups
delivering new products
and services, or improving
efficiencies all play a role
• Labor force growth
impacted by demographics,
immigration, and births and
deaths
Subdued growth expectations
7. Oregon Office of
Economic Analysis
7
Start-up activity is steady, but declining
share as economy grows overall
8. Oregon Office of
Economic Analysis
8
Start-ups declining in all sectors
New Oregon firms by sector, share of all firms within each sector
9. Oregon Office of
Economic Analysis
9
Start-ups declining in all sectors
New Oregon firms by sector, share of all firms within each sector
10. Oregon Office of
Economic Analysis
10
Oregon and the nation
Oregon start-up activity higher than most states, ranking
12th overall in recent years
However, Oregon matches U.S. trends overall as start-ups
concentrated and not evenly distributed
11. Oregon Office of
Economic Analysis
11
Overall dynamism waning as large firms
win out in recent decades
12. Oregon Office of
Economic Analysis
12
Entrepreneur-Related Issues
• Demographics
• 30-somethings are smaller share of
economy as population ages
• Reduced international
immigration
• Noncompete agreements
• Student loan debt
• Health insurance job lock
Broader Economic Issues
• Current firms erect barriers to
entry to reduce competition
• Regulatory burdens and policy
uncertainty
• Slowing of technological
progress, fewer new ideas
Possible reasons why start-ups down
13. Oregon Office of
Economic Analysis
13
Maybe Maybe Not
Does it matter?
• In terms of economic growth, it is not
small businesses or new businesses
that matter the most
• What matters the most are the young,
fast-growing firms
• These so-called Gazelles are a subset of
the larger start-up world
• Never know ahead of time which will
thrive, having more start-ups may
increase number of Gazelles
• Large firms can innovate
• Exact location of R&D less important
• In the past big firms may have spun off
new ideas into start-ups, whereas today
maybe keep in-house
• Risk is loss of flexibility in bureaucracy
• Some industries may lend themselves
to economies of scale
14. Oregon Office of
Economic Analysis
14
• Federal R&D declining
after winding down
the space program
and after the Cold War
• Private sector has
taken the lead
• Good news overall
• Also means any
gains accrue to
private firms and
possibly not broadly
shared
Research & development rising
16. Oregon Office of
Economic Analysis
16
• “Historical accident” key feature of
where firms start
• Other important features include
strong institutions, labor force
availability
• Firms that locally source business
needs help support middle-wage jobs
• Build office staff, sales teams,
production lines, transport product to
market, etc
• Other middle-wage jobs driven by
population growth, which also
supports start-up activity
Homegrown firms matterServiceInnovative
Population
Driven
Business
Support
17. Oregon Office of
Economic Analysis
17
Summary
• Concern is economic recovery slowed by double-whammy of more
firm closures and fewer start-ups
• Business formation and start-up employment was already at or near
all-time low
• Economic consensus: “This looks bad”
• Reality is murky as small and new are not always better
• Economic development
• Homegrown businesses better than recruitment and support local middle-
wage jobs by sourcing locally