For the first time in 35 years, we have more businesses closing than starting.
Editor’s note, Oct. 30: After we published this fact-check, we learned that the Census Bureau had new data that showed firm births were greater than firm deaths in 2012 and 2013. We revised our rating from True to Half True and archived the earlier version here. In the third Republican presidential debate, Florida Sen. Marco Rubio faced a question about his many missed votes in Congress. The CNBC moderator asked why he didn’t settle down and get more done before running for the Oval Office. Rubio basically said that the country didn’t have time to wait for him. "Watching this broadcast tonight, there are millions of people who are living paycheck to paycheck," Rubio said. "They’re working as hard as they ever have, everything costs more and they haven’t had a raise in decades. You have small businesses in America that are struggling. For the first time in 35 years, we have more businesses closing than starting," he said. Rubio has talked about the birth and death of businesses before. It was accurate at one point, based on census data, and we rated the claim True in June 2015. We rated the statement True on debate night as well. An alert reader, however, contacted us to say the census has released more data than we considered in our original report. So we decided to check that out. The U.S. Census Bureau collects data on firm births and deaths as part of a project called Business Dynamics Statistics. The numbers go back to 1977. From that starting point until 2008 and the Great Recession, each year showed more new firms popping up than existing ones going away. In the three years from 2009 until 2011, the trend reversed. There were more deaths than births. The Brookings Institution, a Washington think tank, produced a May 2014 report titled, "Declining Business Dynamism in the United States: A Look at States and Metros." The authors used the Census Bureau’s data but at the time, the data they used only went through 2011. The most recent data now goes through 2013, and what’s most significant is that in 2012, the tide changed. That year, the country saw a net gain of about 36,000 firms and in 2013, a small but still positive increase of a bit over 5,000 new firms. We should note that the difference for 2013 is very small. This chart based on the Census Bureau’s Business Dynamics Statistics shows the ebb and flow. When the blue line is above the red one, firm births are greater than firm deaths. We contacted Ian Hathaway, one of the report co-authors. Hathaway confirmed the latest data and provided an updated spreadsheet. "We now have data for 2012 and 2013 and both show births exceeding deaths," Hathaway said. "Rubio's information is stale." This is not to say that firms are being born at anything close to the clip the country saw in past years. Between 1978 and 2007 (the recession began December 2007), an average of about 497,000 new firms appeared each year. The average for 2012 and 2013 is about 409,000. So the pace of growth is much slower, but the net figure may not be in the negative territory that Rubio described. The data for 2014 are 2015 is unavailable. It is worth noting that the number of firms closing has remained fairly stable. The average since 1978 is about 390,000 closing each year. In 2013, about 400,000 shut their doors. We reached out to the Rubio campaign and did not hear back. Our ruling Rubio said that "for the first time in 35 years, we have more businesses dying than we do starting." As recently as 2014, researchers came to that conclusion looking at Census Bureau data from 2009-11. That’s the information Rubio likely relied on in making his claim. But more up-to-date Census information says the trend has reversed and that in 2012 and 2013, more businesses started then closed. The balance is very tight in 2013 and we don’t have the numbers for 2014 or 2015. We rate this claim Half True.
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