Business Growth

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Establishment Growth Rate (2023)

 

In 2023, the growth in the number of establishments employing workers was 5.1% for the Tucson Metropolitan Statistical Area (MSA). That ranked Tucson fifth among peer western MSAs, which was a substantial decline from 2022 when Tucson placed third among peers. Tucson’s growth in business establishments decreased from a growth rate of 8.4% in 2022, and 5.8% in 2021. Tucson’s slow or non-existent growth between 2012 and 2020 in business establishments was a considerable improvement over the substantial decline during the Great Recession. Since then, business growth, or the growth rate in total establishments, has fluctuated annually but experienced an overall upward trend.

Why is it important?

The change in the total number of establishments reflects the dynamism of the local economy, as well as the overall ups and downs associated with business cycles. Local areas with strong business growth may generate correspondingly strong gains in jobs and income that contribute to increases in the standard of living and the tax base.

How do we compare?

According to the latest data on business starts, the trade, transportation, and utilities industry generated the most new businesses in the Tucson MSA (33.5% of the total), followed by leisure and hospitality (21.6%), education and health services (15.9%), and professional and business services (12.1%). Construction, other services, and the financial activities sectors accounted for about 5% each in new business starts in 2020. The manufacturing and information industries generated far fewer new businesses, the natural resources and mining added no new businesses. Slow or no gains in manufacturing and natural resources and mining reflect, in part, the capital-intensive nature of these sectors, which makes industry entry and exit relatively expensive.

What are the key trends?

While business growth in the Tucson MSA exceeded pre-recession levels in 2022 for the first time in sixteen years, during 2023 business growth again slowed down. Tucson’s 5.1% growth in the total number of establishments employing workers was below the pre-recession level of 6.9% in 2006, yet still remained significantly higher than the average from 2015-2020 (0.4%). Since the Great Recession, Tucson and the state of Arizona have experienced an overall increase in the growth rate in total establishments, with significant gains made in 2021, 2022, and 2023. To explore starts, closures, expansions, and contractions for the U.S., western states, Arizona counties, and comparison MSAs visit the Comparison Page.

How is it measured?

Business growth reflects changes in the number of establishments. An establishment is a single physical location at which business is conducted or services or industrial operations are performed. It is not necessarily identical to a company or enterprise, which may consist of one or more establishments. When two or more activities are carried on at a single location under a single ownership, all activities generally are grouped together as a single establishment. The entire establishment is classified on the basis of its major activity and all data are included in that classification.

Estimates for the number of establishments come from the Quarterly Census of Employment and Wages (QCEW), a quarterly dataset maintained by the Bureau of Labor Statistics (BLS). QCEW data are obtained primarily from state unemployment insurance programs. The QCEW captures approximately 97% of all wage and salary civilian employment in the county. The data exclude those not covered by unemployment insurance: self-employed workers, most agricultural workers on small farms, all members of the Armed Forces, elected officials in most states, most employees of railroads, some domestic workers, most student workers at schools, and employees of certain small nonprofit organizations (BLS, Quarterly Census of Employment and Wages Frequently Asked Questions).

Estimates of business starts, expansions, contractions, and closures come from Statistics of U.S. Businesses (SUSB), an annual datasets maintained by the U.S. Census Bureau and extracted from the Business Register. This datasets cover businesses that generate most of the country's economic activity. The data exclude non-employer businesses, private households, railroads, agricultural production, and most government entities.