Study: Trends in Rural Businesses
The number of businesses in counties outside metropolitan areas is generally in decline. But assets such as rural gathering places, natural amenities and strategic use of broadband could help change that trend.
[imgcontainer] [img:2000-2013+Establishments.jpg] [source]Source: US Census Bureau – County Business Patterns; USDA RUCCFigure 1. Percent change in business establishments by county type, 2000-2013
Rural business establishment trends are worrisome, but potential solutions are available.
Make no mistake. The backbone of the U.S. economy includes entrepreneurs, micro businesses (1-4 employees), and small businesses (5-19 employees). Studies have found that if entrepreneurship – and subsequently micro and small businesses – shrink, job creation and productivity are affected in a negative way.
What are the trends regarding micro businesses and small businesses in urban and rural counties? Is the number of micro businesses and small businesses increasing? Is it declining?
Read a summary of this jobs study in the Daily Yonder.
To take a closer look at how business establishments are doing across different types of counties, we used two datasets. Data about the number of establishments was obtained from the US Census County Business Patterns (CBP) while the USDA Rural-Urban Continuum Code (RUCC) typology was used to group counties into different categories.
A huge advantage of the RUCC is that not only can counties be grouped into the typical metropolitan, micropolitan and “noncore” categories, but each one of these can be further categorized into three additional categories. These nine categories in total provide a more detailed understanding of the dynamics taking place.
To isolate the economic impact of a nearby metropolitan areas and see what was happening in counties least likely to be affected by metropolitan counties, we adjusted the typical grouping of the RUCC counties. We grouped types 4, 6, and 8 (which are nonmetropolitan counties adjacent to a metropolitan areas) and called these “suburban.” And we grouped county types 5,7 and 9 (which are nonmetropolitan counties that are not adjacent to a metropolitan area) and called these “rural” for the purposes of this study.
Figure 1 at the top of the page does not paint a hopeful picture for nonmetropolitan counties regarding micro businesses, small businesses, and the total number of business establishments (which also includes business establishments with more than 20 employees). Two of the three “rural” categories (on the right side of the chart) posted declines in micro business (blue bar), small business (red bar), and total (green bar) establishments between 2000 and 2013, as did all three of the “suburban” categories (the center bars in the chart). However, counties with an urban population of 20,000 or more not adjacent to metro areas experienced increases.
A clear relationship is shown in Figure 2 below: The smaller the county's population, the greater the number of micro businesses as a percentage of of total establishments. However, this is not good news, since the trends show micro businesses declining in "suburban" and almost all rural counties. In fact, micro businesses make up to two-thirds of all business establishments in the most rural counties.
[imgcontainer] [img:2000-2013+Micro+Establishments.jpg] [source]Source: US Census Bureau – County Business Patterns; USDA RUCCFigure 2. Percent Micro Businesses of Total Establishments, 2000 & 2013